Time-Varying Beta And The Subprime Financial Crisis: Evidence From U.S. Industrial Sectors

Main Article Content

Habib Hasnaoui
Ibrahim Fatnassi

Keywords

Subprime Financial Crisis, Time-Varying Beta, Capital Asset Pricing

Abstract

In the current study, we investigate the effect of the subprime financial crisis on the time-varying beta of 10 U.S. industrial sectors. We use daily data, during the period 2002 through 2014, and the bivariate BEKK-GARCH model to the conditional capital asset pricing model (CAPM) to create the time-varying betas for the 10 sectors. After controlling for local and global volatilities, the data enable us to confirm the different magnitudes of influence of the subprime crisis on the 10 industrial sectors. The results are important for investors and portfolio managers, and may have policy implications.

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