| Authors |
Koundouri, P., Kourogenis, N., Pittis, N. and Samartzis, P. |
| Title |
Factor Models of Stock Returns: GARCH Errors versus Time - Varying Betas |
| Abstract |
This paper investigates the implications of time-varying betas in factor models for stock returns. It is shown that a single-factor model (SFMT) with autoregressive betas and homoscedastic errors (SFMT-AR) is capable of reproducing the most important stylized facts of stock returns. An empirical study on the major US stock market sectors shows that SFMT-AR outperforms, in terms of in-sample and out-of-sample performance, SFMT with constant betas and conditionally heteroscedastic (GARCH) errors, as well as two multivariate GARCH-type models. |
| Creation Date |
2014-09-17 |
| Keywords |
autoregressive beta, stock returns, single factor model, conditional heteroscedasticity, in-sample performance, out-of-sample performance |
| Classification JEL |
C22, G10, G11, G12 |
| File |
Factor.Models.of.Stock.Returns.pdf (674473 bytes) |
| File-Function |
First version |
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