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Time-Varying Betas of Banking Sectors

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Abstract

This paper analyzes the evolution of the systematic risk of the banking industries in eight advanced countries using weekly data from 1990 to 2012. Time-varying betas are estimated by means of a Bayesian state-space model with stochastic volatility, whose results are contrasted with those of the standard M-GARCH and rolling-regression models. We show that both country-specific and global events affect the perceived systematic risk, while the impact of the latter differs considerably across countries. Finally, our results do not support the previous findings that the systematic risk of the banking sector was underestimated before the last financial crisis.

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  • Tomas Adam & Sona Benecka & Ivo Jansky, 2012. "Time-Varying Betas of Banking Sectors," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(6), pages 485-504, December.
    • Handle: RePEc:fau:fauart:v:62:y:2012:i:6:p:485-504
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    Cited by:

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    3. Dejan Zivkov & Slavica Manic & Jasmina Duraskovic & Jelena Kovacevic, 2019. "Bidirectional Nexus between Inflation and Inflation Uncertainty in the Asian Emerging Markets – The GARCH-in-Mean Approach," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(6), pages 580-599, December.
    4. Kamil Galuscak & Adam Gersl & Marcela Gronychova & Petr Hlavac & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Jakub Seidler, 2014. "Stress-Testing Analyses of the Czech Financial System," Occasional Publications - Edited Volumes, Czech National Bank, Research and Statistics Department, edition 1, volume 12, number rb12/1 edited by Jan Babecky & Roman Horvath, July.
    5. Oxana Babecka Kucharcukova & Alexis Derviz & Vaclav Hausenblas & Michal Hlavacek & Mark Joy & Narcisa Kadlcakova & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Ivana Kubicova & Jitka Lesanovska, 2014. "Macroprudential Research: Selected Issues," Occasional Publications - Edited Volumes, Czech National Bank, Research and Statistics Department, edition 2, volume 12, number rb12/2 edited by Jan Babecky & Borek Vasicek, July.
    6. Jaromir Baxa & Michal Franta & Tomas Havranek & Roman Horvath & Miroslav Plasil & Marek Rusnak & Borek Vasicek, 2013. "Transmission of Monetary Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research and Statistics Department, edition 1, volume 11, number rb11/1 edited by Jan Babecky & Roman Horvath, July.

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    More about this item

    Keywords

    CAPM; time-varying beta; multivariate GARCH; Bayesian state-space models; stochastic volatility;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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