Time Varying CAPM Betas and Banking Sector RiskEconomics Letters
AbstractThis paper employs the Bai and Perron, 1998 and Bai and Perron, 2003 structural break methodology to investigate whether the CAPM betas for banking sector stocks are time invariant. I find evidence for three large structural shifts in my monthly (1941.02–2008.01) sample. The third break corresponds with a decline in the perceived riskiness of banking stocks in the period starting in 2000.04. The banking sector was thus priced to be less risky during the period associated with rising leverage and financial sector risk.
CopyrightCopyright © 2012, Elsevier
Citation InformationTony Caporale. "Time Varying CAPM Betas and Banking Sector Risk" Economics Letters Vol. 115 Iss. 2 (2012)
Available at: http://works.bepress.com/tony_caporale/36/