IDEAS home Printed from https://ideas.repec.org/a/bla/manch2/v57y1989i4p340-56.html
   My bibliography  Save this article

Modelling Asset Prices with Time-Varying Betas

Author

Listed:
  • Hall, Stephen G
  • Miles, David K
  • Taylor, Mark P

Abstract

This paper pursues the idea that the relevant distributional moments for the Capital Asset Pricing Model (CAPM) are the conditional, rather than the unconditional, covariances of returns. Thus, asset Betas may be time-varying and random rather than constant. The model is parameterized and estimated on monthly U.K. data by an application of the Autoregressive Conditional Heteroscedasticity (ARCH) formulation of Engle and its generalization (GARCH) due to Bollerslev. We also estimate a more general model which nests the consumption-based CAPM of Breeden. The results suggest that perceptions of risk, i.e. conditional variances and covariances, are time-varying but that memories are long and agents update their perceptions relatively slowly. Despite this, measured asset Betas show substantial short-term variation. Estimates of an extended CAPM, nesting both traditional and consumption-based variants, suggest that whilst significant time-variation in risk premia is still evident, no single measure of r Copyright 1989 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Hall, Stephen G & Miles, David K & Taylor, Mark P, 1989. "Modelling Asset Prices with Time-Varying Betas," The Manchester School of Economic & Social Studies, University of Manchester, vol. 57(4), pages 340-356, December.
  • Handle: RePEc:bla:manch2:v:57:y:1989:i:4:p:340-56
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    as
    1. F. Giavazzi & L. Spaventa, 1990. "The "New" EMS," Working Papers 86, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, January.
    3. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrew Worthington & Helen Higgs, 2006. "Market Risk in Demutualized Self-Listed Stock Exchanges: An International Analysis of Selected Time-Varying Betas," Global Economic Review, Taylor & Francis Journals, vol. 35(3), pages 239-257.
    2. J. Andrew Coutts & Terence Mills & Jennifer Roberts, 1997. "Time series and cross-section parameter stability in the market model: the implications for event studies," The European Journal of Finance, Taylor & Francis Journals, vol. 3(3), pages 243-259.
    3. Attiya Y. Javed, 2000. "Alternative Capital Asset Pricing Models: A Review of Theory and Evidence," PIDE-Working Papers 2000:179, Pakistan Institute of Development Economics.
    4. Choudhry, Taufiq, 2005. "Time-varying beta and the Asian financial crisis: Evidence from Malaysian and Taiwanese firms," Pacific-Basin Finance Journal, Elsevier, vol. 13(1), pages 93-118, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:manch2:v:57:y:1989:i:4:p:340-56. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/semanuk.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.