Title

Time Varying CAPM Betas and Banking Sector Risk

Document Type

Article

Publication Date

5-2012

Publication Source

Economics Letters

Abstract

This paper employs the Bai and Perron, 1998 and Bai and Perron, 2003 structural break methodology to investigate whether the CAPM betas for banking sector stocks are time invariant. I find evidence for three large structural shifts in my monthly (1941.02–2008.01) sample. The third break corresponds with a decline in the perceived riskiness of banking stocks in the period starting in 2000.04. The banking sector was thus priced to be less risky during the period associated with rising leverage and financial sector risk.

Inclusive pages

293–295

ISBN/ISSN

0165-1765

Comments

Permission documentation is on file.

Publisher

Elsevier

Volume

115

Issue

2

Peer Reviewed

yes