Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/230826
Authors: 
Asgharian, Hossein
Christiansen, Charlotte
Hou, Ai Jun
Wang, Weining
Year of Publication: 
2020
Series/Report no.: 
IRTG 1792 Discussion Paper No. 2020-020
Abstract: 
We propose a bivariate component GARCH-MIDAS model to estimate the long- and short-run components of the variances and covariances. The advantage of our model to the existing DCC-based models is that it uses the same form for both the variances and covariances and that it estimates these moments simultaneously. We apply this model to obtain long- and short-run factor betas for industry test portfolios, where the risk factors are the market, SMB, and HML portfolios. We use these betas in cross-sectional analysis of the risk premia. Among other things, we find that the risk premium related to the short- run market beta is significantly positive, irrespective of the choice of test portfolio. Further, the risk premia for the short-run betas of all the risk factors are significant outside recessions.
Subjects: 
long-run betas
short-run betas
risk premia
business cycles
component GARCH model
MIDAS
JEL: 
G12
C58
C51
Document Type: 
Working Paper

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