How do alphas and betas move? Uncertainty, learning and time variation in risk loadings
AbstractI employ a parsimonious model with learning but without conditioning information to extract time-varying measures of market-risk sensitivities, pricing errors and pricing uncertainty. Parameters estimated for U.S. equity portfolios show significant fluctuations, along patterns that change across size and book-to-market categories of stocks. Time-varying betas display superior predictive accuracy for portfolio returns against constant and rolling-window OLS estimates. I also study the relationship of betas with business-cycle variables, finding that those of high BE/ME stocks move pro-cyclically, unlike those of low BE/ME stocks. Investment growth, rather than consumption, predicts the betas of high BE/ME and small-firm portfolios.
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 University of Brescia, Department of Economics in its series Working Papers with number 1012.
Date of creation: 2010
Date of revision:
Contact details of provider:
Postal: Via S. Faustino 74/B, 25122 Brescia
Web page: http://www.unibs.it/atp/page.1019.0.0.0.atp?node=224
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Carmine Trecroci, 2012. "Uncertainty and the Dynamics of Multifactor Loadings and Pricing Errors," Economics Bulletin, AccessEcon, vol. 32(3), pages 2453-2463.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Matteo Galizzi).
If references are entirely missing, you can add them using this form.