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Time‐varying Beta Risk for Australian Industry Portfolios: An Exploratory Analysis
Author(s) -
Faff R.W.,
Brooks R.D.
Publication year - 1998
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00209
Subject(s) - univariate , capital asset pricing model , econometrics , multivariate statistics , volatility (finance) , economics , systematic risk , beta (programming language) , deregulation , financial economics , actuarial science , statistics , mathematics , computer science , macroeconomics , programming language
The central focus of this paper is to provide an initial exploratory examination of ex post time‐varying beta estimation, modeling and asset pricing tests. In particular, these issues are investigated using a sample of monthly data on Australian industry portfolios over the nineteen‐year period 1974 to 1992. While primarily illustrative in nature, the industry betas are modeled, estimated and tested with reasonable success in terms of regimes related to periods of regulation/deregulation/imputation; the level of market returns; and a measure of volatility on the risk‐free rate of interest. However, univariate and multivariate tests reported in the paper provided mixed evidence concerning the applicability of a time‐varying beta CAPM, that incorporates these variables.