Multiscale systematic risk
Date
2005
Authors
Gençay, R.
Selçuk, F.
Whitcher, B.
Editor(s)
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
Journal of International Money and Finance
Print ISSN
0261-5606
Electronic ISSN
1873-0639
Publisher
Pergamon Press
Volume
24
Issue
1
Pages
55 - 70
Language
English
Type
Journal Title
Journal ISSN
Volume Title
Series
Abstract
In this paper we propose a new approach to estimating systematic risk (the beta of an asset). The proposed method is based on a wavelet multiscaling approach that decomposes a given time series on a scale-by-scale basis. The empirical results from different economies show that the relationship between the return of a portfolio and its beta becomes stronger as the wavelet scale increases. Therefore, the predictions of the CAPM model should be investigated considering the multiscale nature of risk and return. © 2004 Elsevier Ltd. All rights reserved.