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Time-varying continuous and jump betas: the role of firm characteristics and periods of stress
journal contribution
posted on 2023-05-19, 00:01 authored by Alexeev, V, Dungey, M, Yao, WUsing high frequency data we decompose the time-varying beta for stocks into beta for continuous systematic risk and beta for discontinuous systematic risk. Estimated discontinuous betas for S&P500 constituents over 2003-2011 generally exceed the corresponding continuous betas. Smaller stocks are more sensitive to discontinuities than their larger counterparts, and during periods of financial distress, high leverage stocks are more exposed to systematic risk. Higher credit ratings and lower volatility are each associated with smaller betas. Industry effects are also apparent. We use the estimates to show that discontinuous risk carries a significantly positive premium, but continuous risk does not.
Funding
Australian Research Council
History
Publication title
Journal of Empirical FinanceVolume
40Pagination
1-19ISSN
0927-5398Department/School
TSBEPublisher
Elsevier BVPlace of publication
The NetherlandsRights statement
Crown Copyright 2016Repository Status
- Restricted