Does Beta React to Market Conditions? Estimates of Bull and Bear Betas using a Nonlinear Market Model with an Endogenous Threshold Parameter
AbstractWe apply a logistic smooth transition market model (LSTM) to a sample of returns on Australian industry portfolios to investigate whether bull and bear market betas differ. Unlike other studies, our LSTM model allows for smooth transition between bull and bear states and allows the data to determine the threshold value. The estimated value of the smoothness parameter was very large for all industries implying that transition is abrupt. Therefore we estimated the threshold as a parameter along with the two betas in a dual beta market (DBM) framework using a sequential conditional least squares (SCLS) method. Using Lagrange Multiplier type tests of linearity, and the SCLS method our results indicate that for all but two industries the bull and bear betas are significantly different.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 9/03.
Length: 29 pages
Date of creation: Apr 2003
Date of revision:
Contact details of provider:
Postal: PO Box 11E, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/depts/ebs/
More information through EDIRC
Other versions of this item:
- George Woodward & Heather Anderson, 2009. "Does beta react to market conditions? Estimates of 'bull' and 'bear' betas using a nonlinear market model with an endogenous threshold parameter," Quantitative Finance, Taylor and Francis Journals, vol. 9(8), pages 913-924.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-05-29 (All new papers)
- NEP-CFN-2003-05-29 (Corporate Finance)
- NEP-ETS-2003-05-29 (Econometric Time Series)
- NEP-FIN-2003-05-29 (Finance)
- NEP-RMG-2003-05-29 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S119-36, Suppl. De.
- Neftci, Salih N, 1984. "Are Economic Time Series Asymmetric over the Business Cycle?," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 307-28, April.
- Saumitra N. Bhaduri & S. Raja Sethu Durai, 2006. "Asymmetric beta in bull and bear market conditions: evidences from India," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(1), pages 55-59, January.
- Dumitriu, Ramona & Stefanescu, Razvan & Nistor, Costel, 2010. "Systematic risks for the financial and for the non-financial Romanian companies," MPRA Paper 41636, University Library of Munich, Germany, revised 28 Feb 2010.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simone Grose).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.