Economics at your fingertips  

Realized Beta: Persistence and Predictability

Torben Andersen, Tim Bollerslev, Francis X. Diebold and Ginger Wu

A chapter in Econometric Analysis of Financial and Economic Time Series, 2006, pp 1-39 from Emerald Group Publishing Limited

Abstract: A large literature over several decades reveals both extensive concern with the question of time-varying betas and an emerging consensus that betas are in fact time-varying, leading to the prominence of the conditional CAPM. Set against that background, we assess the dynamics in realized betas, vis-à-vis the dynamics in the underlying realized market variance and individual equity covariances with the market. Working in the recently popularized framework of realized volatility, we are led to a framework of nonlinear fractional cointegration: although realized variances and covariances are very highly persistent and well approximated as fractionally integrated, realized betas, which are simple nonlinear functions of those realized variances and covariances, are less persistent and arguably best modeled as stationary I(0) processes. We conclude by drawing implications for asset pricing and portfolio management.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link) ... d&utm_campaign=repec (text/html) ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
Working Paper: Realized Beta: Persistence and Predictability (2004) Downloads
Working Paper: Realized beta: Persistence and predictability (2004) Downloads
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:

DOI: 10.1016/S0731-9053(05)20020-8

Access Statistics for this chapter

More chapters in Advances in Econometrics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().

Page updated 2024-04-19
Handle: RePEc:eme:aecozz:s0731-9053(05)20020-8