Realized Beta: Persistence and Predictability
Torben Andersen (),
Tim Bollerslev (),
Francis Diebold () and
Jin Wu ()
Additional contact information
Jin Wu: Department of Economics, University of Pennsylvania
PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania
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-Ã -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.
Keywords: Quadratic variation and covariation; realized volatility; asset pricing; CAPM; equity betas; long memory; nonlinear fractional cointegration; continuous-time methods (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2003-01-03, Revised 2004-03-01
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed
Downloads: (external link)
https://economics.sas.upenn.edu/sites/default/file ... ng-papers/04-018.pdf (application/pdf)
Working Paper: Realized Beta: Persistence and Predictability (2004)
Working Paper: Realized beta: Persistence and predictability (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:04-018
Access Statistics for this paper
More papers in PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 133 South 36th Street, Philadelphia, PA 19104. Contact information at EDIRC.
Bibliographic data for series maintained by Administrator ().