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Hossein Asgharian. Photo.

Hossein Asgharian

Professor

Hossein Asgharian. Photo.

Long- and short-run components of factor betas : Implications for stock pricing

Author

  • Hossein Asgharian
  • Charlotte Christiansen
  • Ai Jun Hou
  • Weining Wang

Summary, in English

We propose a new model that estimates 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 estimates these moments simultaneously. We apply this model to obtain long- and short-run factor betas for industry test portfolios. 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.

Department/s

  • Department of Economics

Publishing year

2021-09

Language

English

Publication/Series

Journal of International Financial Markets, Institutions and Money

Volume

74

Document type

Journal article

Publisher

North-Holland

Topic

  • Economics

Keywords

  • Component GARCH model
  • Long-run betas
  • MIDAS
  • Risk premia
  • Short-run betas

Status

Published

ISBN/ISSN/Other

  • ISSN: 1042-4431