Time-varying Betas of the Banking Sector

Tomas Adam, Soňa Benecká and Ivo Jánský

No 2012/23, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This paper analyses the evolution of systematic risk of banking industries in eight advanced countries using weekly data from 1990 to 2012. The estimation of time-varying betas is done by means of a Bayesian state space model with stochastic volatility, whose results are contrasted with those of the standard M-GARCH and rolling-regression models. We show that both country specific and global events affect the perceived systematic risk, while the impact of the latter differs largely across countries. Finally, our results do not support the previous findings that systematic risk of the banking sector was underestimated before the last financial crisis.

Keywords: CAPM; Time-varying Beta; Multivariate GARCH; Bayesian State Space Models; Stochastic Volatility (search for similar items in EconPapers)
JEL-codes: C11 G12 G21 (search for similar items in EconPapers)
Pages: 21pages
Date: 2012-07, Revised 2012-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ore and nep-rmg
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Time-Varying Betas of Banking Sectors (2012)
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