IDEAS home Printed from https://ideas.repec.org/p/quc/wpaper/0006.html
   My bibliography  Save this paper

Wavelet Betas At The Sector Level: A Lens To Capture Risk Dynamics That Standard Betas Ignore

Author

Listed:
  • Joan Nix and Bruce McNevin

    (Department of Economics and BBA, Queens College of the City University of New York)

Abstract

The application of the CAPM to ten S&P sectors is investigated using wavelet analysis. Wavelet methods provide a unified framework for investigating the relationship among variables at different frequencies and the evolution of these relationships over time. Betas at different time and frequency scales using wavelet analysis are estimated for ten sectors and compared to the betas estimated from a simple regression of the market model. We find coherence and frequency differences across sectors that are not reflected in the estimation of standard beta. Given that there is no a priori reason to assume that the synchronization of sector returns with market returns has only a time varying dimension, wavelet analysis by allowing for multiple time-varying frequencies offers estimates of sector level betas that capture features of the underlying risk dynamics that would be missed using the standard estimate of beta.

Suggested Citation

  • Joan Nix and Bruce McNevin, 2014. "Wavelet Betas At The Sector Level: A Lens To Capture Risk Dynamics That Standard Betas Ignore," Working Papers 0006 Classification- JEL:, Department of Economics, Queens College of the City University of New York, revised Sep 2014.
    • Handle: RePEc:quc:wpaper:0006
    as

    Download full text from publisher

    File URL: http://www.qc-econ-bba.org/RePEc/pdf/0006.pdf
    File Function: Revised version, 2014
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Wavelet Analysis; CAPM; Equity Betas; Standard & Poor Sectors;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:quc:wpaper:0006. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cara Marshall (email available below). General contact details of provider: https://edirc.repec.org/data/deqcuus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.