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Time-Varying Behaviour of Sector Beta Risk – The Case of Poland

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  • Kurach, Radosław

    (Wroclaw University of Economics, Poland)

  • Stelmach, Jerzy

    (Wroclaw University of Economics, Poland)

Abstract

The problem of proper beta (measure of systematic risk) estimation is crucial both for academic considerations and financial market practice purposes. There is a group of empirical studies that questioned the assumption of beta time-invariance, while only some of them tried to model the process of beta time-variation. Basing on previous research, we apply the state-space methodology, which was found to be the most relevant. We focus our attention on the Polish stock market and five sector indices. Unlike other studies, we estimate our models using three different data frequencies (daily, weekly and monthly), while holding the estimation period fixed. The results indeed show the dependence on data frequency; however, in most cases, the persistence parameter is close to unity, which indicates long-lasting shocks to beta.

Suggested Citation

  • Kurach, Radosław & Stelmach, Jerzy, 2014. "Time-Varying Behaviour of Sector Beta Risk – The Case of Poland," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 139-159, March.
    • Handle: RePEc:rjr:romjef:v::y:2014:i:1:p:139-159
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    References listed on IDEAS

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    Cited by:

    1. Szczepocki Piotr, 2019. "Clustering Companies Listed on the Warsaw Stock Exchange According to Time-Varying Beta," Econometrics. Advances in Applied Data Analysis, Sciendo, vol. 23(2), pages 63-79, June.
    2. Barbara Bedowska-Sojka, 2017. "Evaluating the Accuracy of Time-varying Beta. The Evidence from Poland," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 17, pages 161-176.

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    More about this item

    Keywords

    systematic risk; market model; beta hedging; Kalman filter; state-space methodology;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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