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Int. J. Financial Stud. 2017, 5(4), 33; https://doi.org/10.3390/ijfs5040033

Goodness-of-Fit versus Significance: A CAPM Selection with Dynamic Betas Applied to the Brazilian Stock Market

1
FUNCEF—Fundação dos Economiários Federais, SCN Qd. 2 Bl. A—13° andar Corporate Center, Brasilia-DF 70712-900, Brazil
2
Graduate School in Economics, Catholic University of Brasilia, SGAN 916, Module B., Brasilia-DF 70790-160, Brazil
*
Author to whom correspondence should be addressed.
Academic Editor: Nicholas Apergis
Received: 29 September 2017 / Revised: 30 October 2017 / Accepted: 23 November 2017 / Published: 4 December 2017
(This article belongs to the Special Issue Financial Economics)
View Full-Text   |   Download PDF [1559 KB, uploaded 4 December 2017]

Abstract

In this work, a Capital Asset Pricing Model (CAPM) with time-varying betas is considered. These betas evolve over time, conditional on financial and non-financial variables. Indeed, the model proposed by Adrian and Franzoni (2009) is adapted to assess the behavior of some selected Brazilian equities. For each equity, several models are fitted, and the best model is chosen based on goodness-of-fit tests and parameters significance. Finally, using the selected dynamic models, VaR (Value-at-Risk) measures are calculated. We can conclude that CAPM with time-varying betas provide less conservative VaR measures than those based on CAPM with static betas or historical VaR. View Full-Text
Keywords: dynamic models; Kalman filter; time-varying beta; CAPM; VaR dynamic models; Kalman filter; time-varying beta; CAPM; VaR
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
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Ronzani, A.R.P.; Candido, O.; Maldonado, W.F.L. Goodness-of-Fit versus Significance: A CAPM Selection with Dynamic Betas Applied to the Brazilian Stock Market. Int. J. Financial Stud. 2017, 5, 33.

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