Conditional CAPM: Time-varying Betas in the Brazilian Market

Revista Brasileira de Finanças

Fernando Antonio Lucena Aiube¹  Frances Fischberg Blank²  Carlos Patricio Samanez²  Tara Keshar Nanda Baidya³ 

[1] Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio) & Petrobras;Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio);UNIGRANRIO;

关键词: beta behavior can be modeled as a stochastic process dependent on conditioning variables related to business cycle and estimated using Kalman filter. This paper studies alternative models for portfolios sorted by size and book-to-market ratio in the Brazilian stock market and compares their adjustment to data. Asset pricing tests based on time-series and cross-sectional approaches are also implemented. A random walk process combined with conditioning variables is the preferred model;    reducing pricing errors compared to unconditional CAPM;    but the errors are still significant. Cross-sectional test show that book-to-market ratio becomes less relevant;    Conditional CAPM;    time-varying beta;    stock market anomalies;    Kalman filter;   

DOI  :  

来源: DOAJ

【 摘 要 】

The conditional CAPM is characterized by time-varying market beta. Based on state-space models approach, beta behavior can be modeled as a stochastic process dependent on conditioning variables related to business cycle and estimated using Kalman filter. This paper studies alternative models for portfolios sorted by size and book-to-market ratio in the Brazilian stock market and compares their adjustment to data. Asset pricing tests based on time-series and cross-sectional approaches are also implemented. A random walk process combined with conditioning variables is the preferred model, reducing pricing errors compared to unconditional CAPM, but the errors are still significant. Cross-sectional test show that book-to-market ratio becomes less relevant, but past returns still capture cross-section variation

【 授权许可】

Unknown