Does beta react to market conditions? Estimates of 'bull' and 'bear' betas using a nonlinear market model with an endogenous threshold parameter
AbstractThe authors use a logistic smooth transition market (LSTM) model to investigate whether 'bull' and 'bear' market betas for Australian industry portfolios returns differ. The LSTM model allows the data to determine a threshold parameter that differentiates between 'bull' and 'bear' states, and it also allows for smooth transition between these two states. Their results indicate that 'bull' and 'bear' betas are significantly different for most industries, and that up-market risk is not always lower than down-market risk. LSTM models indicate that the transition between 'bull' and 'bear' states is abrupt, supporting a dual-beta market modelling framework.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Quantitative Finance.
Volume (Year): 9 (2009)
Issue (Month): 8 ()
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Web page: http://taylorandfrancis.metapress.com/link.asp?target=journal&id=111405
Other versions of this item:
- George Woodward & Heather Anderson, 2003. "Does Beta React to Market Conditions? Estimates of Bull and Bear Betas using a Nonlinear Market Model with an Endogenous Threshold Parameter," Monash Econometrics and Business Statistics Working Papers 9/03, Monash University, Department of Econometrics and Business Statistics.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
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