Modeling the Time Variation in Factor Exposures

Johan Knif, James W. Kolari, Gregory Koutmos and Seppo Pynonen

Journal of Finance and Investment Analysis, 2023, vol. 12, issue 2, 2

Abstract: This paper offers new evidence on the dynamic behavior of multifactor models. Specifically, we investigate the significance and temporal stability of conditional factor betas in the context of multifactor asset pricing models. Using a Kalman filter approach, we find that conditional factor betas are dynamic and their statistical significance varies over time. Furthermore, the inclusion of more factors improves that statistical significance and time stability of the market factor. Overall, our empirical results support the view that multifactors may not be independent risk factors but help to better identify the market factor. JEL classification numbers: G11; G12

Keywords: Asset Pricing; Risk Factors. (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.scienpress.com/Upload/JFIA%2fVol%2012_2_2.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spt:fininv:v:12:y:2023:i:2:f:12_2_2

Access Statistics for this article

More articles in Journal of Finance and Investment Analysis from SCIENPRESS Ltd
Bibliographic data for series maintained by Eleftherios Spyromitros-Xioufis ().