Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171878
Authors: 
Alexeev, Vitali
Dungey, Mardi
Yao, Wenying
Year of Publication: 
2016
Citation: 
[Journal:] Econometrics [ISSN:] 2225-1146 [Volume:] 4 [Year:] 2016 [Issue:] 2 [Pages:] 1-15
Abstract: 
Using high-frequency data, we decompose the time-varying beta for stocks into beta for continuous systematic risk and beta for discontinuous systematic risk. Estimated discontinuous betas for S&P500 constituents between 2003 and 2011 generally exceed the corresponding continuous betas. We demonstrate how continuous and discontinuous betas decrease with portfolio diversification. Using an equiweighted broad market index, we assess the speed of convergence of continuous and discontinuous betas in portfolios of stocks as the number of holdings increase. We show that discontinuous risk dissipates faster with fewer stocks in a portfolio compared to its continuous counterpart.
Subjects: 
systematic risk
jump diffusion
portfolio diversification
high-frequency data
JEL: 
C58
G11
C61
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Article
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