Do time-varying betas help in asset pricing? Evidence from the Borsa Istanbul Stock Exchange
Author(s)
Advisor
Akdeniz, LeventDate
2013Publisher
Bilkent University
Language
English
Type
ThesisItem Usage Stats
192
views
views
45
downloads
downloads
Abstract
The purpose of this thesis is to investigate the time variation in betas of
nonfinancial firms traded in the Borsa Istanbul Stock Exchange over the period from
January, 1998 to December, 2011 by utilizing the threshold CAPM of Akdeniz,
Altay-Salih & Caner (2003). The threshold CAPM defines beta as a function of an
underlying economic variable, namely the threshold variable, to allow beta to change
among two different regimes when the threshold variable hits a certain threshold
level. For empirical analysis, monthly observations of interest rates, currency basket,
real effective currency index, and market volatility are selected as candidates for the
threshold variable. The empirical findings indicate significant time variation in betas
during the sample period due to rate of changes in the currency basket level. The
findings of this study also suggest that dynamics of time variation in betas differ
across industry specifications, market capitalizations and book-to-market ratios.
Furthermore, comparing the pricing performance of the model with the traditional
CAPM via time-series regressions, the threshold CAPM performs better in pricing.