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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, W
Using 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 Finance

Volume

40

Pagination

1-19

ISSN

0927-5398

Department/School

TSBE

Publisher

Elsevier BV

Place of publication

The Netherlands

Rights statement

Crown Copyright 2016

Repository Status

  • Restricted

Socio-economic Objectives

Savings and investments

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    University Of Tasmania

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