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The Sensitivity of Beta to the Time Horizon when Log Prices follow an Ornstein-Uhlenbeck Process

초록

영어

This paper provides a new theoretical approach to investigate the sensitivity of the familiar beta of the capital asset pricing model (CAPM) to the length of the return measurement interval; a phenomenon known as the Intervalling effect. By setting the problem in a continuous time setting, and using exact results, we are able to generalize existing results in the literature. We derive an expression for beta as a function of the time horizon h, conditional on current time t. We show that beta is monotonic in h and derive conditions for it to be increasing or decreasing.

목차

Abstract
 1. Introduction
 2. Framework
 3. Autocorrelation and CAPM Beta
  3.1 Autocorrelation
  3.2 CAPM Beta
 4. Multiplicative Returns.
 5. The Intervalling Effect; some Empirical Findings.
  5.1 Data and Method
  5.2 Empirical Results
 6. Empirical Implications for Market Efficiency.
  6.1 The Market Model and the Data
  6.2 Methodological Issues
  6.3 Market Efficiency Indicator and Empirical Result
  6.4 Autocorrelation and Market Efficiency
 7. Conclusion.
 8. Tables and Figures
 9. Appendix
 10. Reference

저자정보

  • K. J.Hong University of Cambridge and Korea Capital Market Institute
  • S.Satchell Trinity College, University of Cambridge

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