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WHAT DETERMINES THE PERSISTENCE OF BETA?
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2017 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Asset pricing models such as the CAPM calls for the estimation of beta as a measure of the systematic risk. Using historical betas as an input to portfolio analysis requires the assumption of beta stationarity. The existing literature on beta dynamics suggest a somewhat high dispersion of the beta persistence across stocks. In previously unexplored territory, this study aims to investigate factors associated with the degree of beta persistence. By using a sample of 237 U.S. stocks with daily returns observed over the period 1984 to 2015, yearly stock betas were estimated using a GARCH / Maximum Likelihood framework. Autocorrelation properties of these beta series was then crosssectionally regressed on five hypothesized determining variables. Product type as well as the absolute value of beta was found to have a significant effect on the first-order autocorrelation of beta.

Place, publisher, year, edition, pages
2017.
Keywords [en]
CAPM, Beta, Autocorrelation, GARCH, Systematic risk
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-355595OAI: oai:DiVA.org:uu-355595DiVA, id: diva2:1229854
Supervisors
Examiners
Available from: 2018-07-02 Created: 2018-07-02 Last updated: 2018-07-02Bibliographically approved

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