Time-Varying Beta Estimators in the Mexican Emerging Market

This paper compares the performance of three different time-varying betas that have never previously been compared: the rolling OLS estimator, a nonparametric estimator and an estimator based on GARCH models. The study is conducted using returns from the Mexican stock market grouped into six portfol...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Zárraga Alonso, Ainhoa, Nieto Domenech, Belén, Orbe Mandaluniz, Susan
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2011
Subjects
Stochastic models
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Summary:This paper compares the performance of three different time-varying betas that have never previously been compared: the rolling OLS estimator, a nonparametric estimator and an estimator based on GARCH models. The study is conducted using returns from the Mexican stock market grouped into six portfolios for the period 2003-2009. The comparison, based on asset pricing perspective and mean-variance space returns, concludes that GARCH based beta estimators outperform the others when the comparison is in terms of time series while the nonparametric estimator is more appropriate in the cross-sectional context.