Time Varying Beta: The Heterogeneous Autoregressive Beta Model
Abstract
Conventional models of volatility estimation do not capture the persistence in high-frequency
market data and are not able to limit the impact of market microstructure noise present
at very finely sampled intervals. In an attempt to incorporate these two elements,
we use the beta-metric as a proxy for equity-specific volatility and use finely sampled
time-varying conditional forecasts estimated using the Heterogeneous Autoregressive
framework to form a predictive beta model. The findings suggest that this predictive
beta is better able to capture persistence in financial data and limit the effect
of microstructure noise in high-frequency data when compared to the existing benchmarks.
Type
Honors thesisDepartment
EconomicsPermalink
https://hdl.handle.net/10161/3402Citation
Jain, Kunal (2011). Time Varying Beta: The Heterogeneous Autoregressive Beta Model. Honors thesis, Duke University. Retrieved from https://hdl.handle.net/10161/3402.Collections
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