Beta Risk and Regime Shift in Market Volatility

Download or read book Beta Risk and Regime Shift in Market Volatility written by Roland George Shami and published by . This book was released on 2006 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we relate security returns in the thirty securities in the Dow Jones index to regime shifts in the market portfolio (Samp;P500) volatility. We model market volatility as a Markov switching process of order one and estimate non-diversifiable security risk (beta) in the different market volatility regimes. We test the significance of the premium of the beta risk associated with the different market regimes and find evidence of a relationship between security return and beta risk when conditional on the up and down market movement.