Time-varying beta risk of australian industry portfolios: A comparison of modelling techniques

Robert D. Brooks, Robert W. Faff, Michael D. McKenzie

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This paper investigates three techniques for the estimation of conditional time-dependent betas: (a) a multivariate generalised ARCH approach; (b) a time-varying beta market model approach suggested by Schwert and Seguin (1990); and (c) the Kalman filter technique. These approaches are applied to a sample of returns on Australian industry portfolios over the period 1974-1996. The evidence found in this paper, based on in-sample forecast errors, overwhelmingly supports the Kalman filter approach When out-of-sample forecasts are considered the evidence again finds in favour of the Kalman filter approach.

LanguageEnglish
Pages1-22
Number of pages22
JournalAustralian Journal of Management
Volume23
Issue number1
DOIs
Publication statusPublished - 1998

Fingerprint

Time-varying beta
Industry
Modeling
Kalman filter
Market model
Out-of-sample forecasting
Forecast error
Autoregressive conditional heteroscedasticity

Keywords

  • Garch
  • Kalman filter
  • Time-varying beta

Cite this

Brooks, Robert D. ; Faff, Robert W. ; McKenzie, Michael D. / Time-varying beta risk of australian industry portfolios : A comparison of modelling techniques. In: Australian Journal of Management. 1998 ; Vol. 23, No. 1. pp. 1-22.
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Time-varying beta risk of australian industry portfolios : A comparison of modelling techniques. / Brooks, Robert D.; Faff, Robert W.; McKenzie, Michael D.

In: Australian Journal of Management, Vol. 23, No. 1, 1998, p. 1-22.

Research output: Contribution to journalArticleResearchpeer-review

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