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| Author: | Mergner, S. Bulla, J. |
| Title: | Time-varying beta risk of Pan-European industry portfolios: A comparison of alternative modeling techniques Time-varying beta risk of Pan-European industry portfolios: A comparison of alternative modeling techniques |
| Journal: | European Journal of Finance
2008 : OCT-DEC, VOL. 14:7-8, p. 771-802 |
| Index terms: | beta factor risk analysis volatility models Europe |
| Freeterms: | time-varying beta risk Kalman filter bivariate t-GARCH stochastic volatility efficient Monte Carlo likelihood Markov switching European industry portfolios |
| Language: | eng |
| Abstract: | Using weekly data over the period 1987-2005, six different modeling techniques in addition to the standard constant coefficient model are employed: a bivariate t-GARCH(1,1) model, two Kalman filter (KF)-based approaches, a bivariate stochastic volatility model estimated via the efficient Monte Carlo likelihood technique as well as two Markov switching models. The author investigates the time-varying behavior of systematic risk for 18 pan-European sectors. A comparison of ex-ante forecast performances of the different models indicate that the random walk process in connection with the KF is the preferred model to describe and forecast the time-varying behavior of sector betas in a European context. |
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