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Sequential monitoring of portfolio betas

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  • Vasyl Golosnoy

    (Ruhr University Bochum)

Abstract

We suggest statistical instruments for on-line surveillance of the portfolio characteristic beta from the one factor model (CAPM). The aim is to check at every new date, whether the investor’s portfolio exhibits the required beta factors. Daily realized betas calculated with intraday information constitute the time series of interest. We consider both the conventional as well as our novel two scale realized beta estimators. The proposed monitoring schemes are designed to provide timely signals that the actual portfolio betas may deviate from the desired values in a statistically significant way. The empirical study illustrates the proposed methodology for US market data.

Suggested Citation

  • Vasyl Golosnoy, 2018. "Sequential monitoring of portfolio betas," Statistical Papers, Springer, vol. 59(2), pages 663-684, June.
    • Handle: RePEc:spr:stpapr:v:59:y:2018:i:2:d:10.1007_s00362-016-0783-6
    DOI: 10.1007/s00362-016-0783-6
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    More about this item

    Keywords

    One factor model; Control charts; On-line monitoring; Realized beta; Statistical process control;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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