Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/223251 
Year of Publication: 
2020
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 46/2020
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
The beta dispersion, which is the spread of betas on a stock market, can be interpreted as a measure of market vulnerability. This study examines the economic idea of the beta dispersion and its application as a market return predictor. Based on the empirical beta dispersion observed in the US equity market, the study develops measures to predict future market returns. These dispersion measures have substantial predictive power for future market movements. Moreover, I show that the informational content of beta dispersion can be successfully exploited by market timing strategies with the help of distributional regressions. This is an innovative application of this novel way of modeling the relationship between multiple variables and appears to be quite useful for timing strategies.
Subjects: 
beta dispersion
market return predictability
systematic risk
predictice regression
distributional regression
market timing
investment stragies
JEL: 
G10
G11
G17
ISBN: 
978-3-95729-756-3
Document Type: 
Working Paper

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