Do time-varying betas help in asset pricing? evidence from borsa Istanbul

Date
2015
Advisor
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Source Title
Emerging Markets Finance and Trade
Print ISSN
1540-496X
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Publisher
Routledge
Volume
51
Issue
4
Pages
747 - 756
Language
English
Type
Article
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Abstract

We investigate the time variation in the market risk of industry portfolios of Borsa Istanbul with respect to changes in economic conditions by employing the threshold CAPM. The threshold CAPM defines beta as a function of an underlying economic variable, the threshold variable, to allow beta to change between two different regimes when the threshold variable hits a certain threshold level. We use interest rate, currency basket, real effective currency index, and market volatility as candidates for the threshold variable. We find there is a significant time variation in betas with respect to changes in the currency basket level.

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Keywords
Asset pricing, Threshold CAPM, Time variation in beta
Citation
Published Version (Please cite this version)