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Stochastic structure of the time-varying beta: evidence from the UK companies

Stochastic structure of the time-varying beta: evidence from the UK companies
Stochastic structure of the time-varying beta: evidence from the UK companies
The stochastic structure of time–varying betas from 15 companies in the UK is investigated. Time–varying betas are estimated by means of the bivariate MA–GARCH model. The stochastic structure is investigated by means of two fractional integration tests, the Geweke and Porter–Hudak and the Robinson tests, and a structural–break–oriented unit root test. Results show that time–varying betas are mean–reverting but only few have a long memory and thus are mean–reverting at a slow rate. This result is further backed by the structural break unit root test. These results contradict earlier studies, which fail to find a stationary beta. Stationary betas may imply that stock returns may be forecast in the long run.
1463-6786
768-791
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728

Choudhry, Taufiq (2002) Stochastic structure of the time-varying beta: evidence from the UK companies. The Manchester School, 70 (6), 768-791. (doi:10.1111/1467-9957.00324).

Record type: Article

Abstract

The stochastic structure of time–varying betas from 15 companies in the UK is investigated. Time–varying betas are estimated by means of the bivariate MA–GARCH model. The stochastic structure is investigated by means of two fractional integration tests, the Geweke and Porter–Hudak and the Robinson tests, and a structural–break–oriented unit root test. Results show that time–varying betas are mean–reverting but only few have a long memory and thus are mean–reverting at a slow rate. This result is further backed by the structural break unit root test. These results contradict earlier studies, which fail to find a stationary beta. Stationary betas may imply that stock returns may be forecast in the long run.

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Published date: 2002

Identifiers

Local EPrints ID: 35834
URI: http://eprints.soton.ac.uk/id/eprint/35834
ISSN: 1463-6786
PURE UUID: d13cb830-c99a-45a3-8048-1ea66168bd9e
ORCID for Taufiq Choudhry: ORCID iD orcid.org/0000-0002-0463-0662

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Date deposited: 23 May 2006
Last modified: 18 Feb 2021 16:55

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Author: Taufiq Choudhry ORCID iD

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