Time varying CAPM betas and banking sector risk
AbstractThis paper employs the Bai and Perron (1998, 2003) structural break methodology to investigate whether the CAPM betas for banking sector stocks are time invariant. I find evidence for three large structural shifts in my monthly (1941.02–2008.01) sample. The third break corresponds with a decline in the perceived riskiness of banking stocks in the period starting in 2000.04. The banking sector was thus priced to be less risky during the period associated with rising leverage and financial sector risk.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 115 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/ecolet
CAPM; Financial risk; Structural breaks;
Find related papers by JEL classification:
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- G1 - Financial Economics - - General Financial Markets
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