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Time-varying continuous and jump betas: the role of firm characteristics and periods of stress

Version 2 2024-06-13, 10:17
Version 1 2016-11-15, 19:05
journal contribution
posted on 2024-06-13, 10:17 authored by V Alexeev, M Dungey, W Yao
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.

History

Journal

Journal of empirical finance

Volume

40

Pagination

1-19

Location

Amsterdam, The Netherlands

ISSN

0927-5398

Language

eng

Publication classification

C Journal article, C1 Refereed article in a scholarly journal

Copyright notice

2016, Crown Copyright

Publisher

Elsevier