Asgharian, Hossein, Christiansen, Charlotte, Hou, Aijun et al. (1 more author) (2021) Long- and Short-Run Components of Factor Betas:Implications for Equity Pricing. Journal of International Financial Markets, Institutions and Money. 101412. ISSN 1042-4431
Abstract
We propose a bivariate component GARCH-MIDAS model to estimate the long- and short-run components of the variances and covariances. The advantage of our model to the existing DCC-based models is that it uses the same form for both the variances and covariances and that it estimates these moments simultaneously. We apply this model to obtain long- and short-run factor betas for industry test portfolios, where the risk factors are the market, SMB, and HML portfolios. We use these betas in cross-sectional analysis of the risk premia. Among other things, we find that the risk premium related to the short-run market beta is significantly positive, irrespective of the choice of test portfolio. Further, the risk premia for the short-run betas of all the risk factors are significant outside recessions.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2021 The Authors |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) |
Depositing User: | Pure (York) |
Date Deposited: | 16 Mar 2022 13:40 |
Last Modified: | 17 Dec 2024 00:20 |
Published Version: | https://doi.org/10.1016/j.intfin.2021.101412 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.1016/j.intfin.2021.101412 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:184814 |
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Description: Long- and short-run components of factor betas: Implications for stock pricing
Licence: CC-BY 2.5