Time varying CAPM betas and banking sector risk |
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Authors: | Tony Caporale |
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Institution: | Department of Economics and Finance, University of Dayton, 45469 Dayton, OH, United States |
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Abstract: | This 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. |
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Keywords: | C1 G1 |
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