September 11 and Time-Varying Beta of United States Companies

Abstract

The tragic events of September 11, 2001 in the United States is said to have adversely affected the global economy and the financial markets around the world. This paper empirically investigates the effects of the terrorist attacks and the period after on the time-varying beta (risk) of a few companies in the United States. Daily data from 1991 to 2002 and the bivariate MA-GARCH model are applied to create the time-varying betas for the firms. Results indicate that September 11 events and the period after affected most of the United States companies under investigation. The size and direction of the effect varies according to the firms. All companies did not experience an increase in the beta.

Keywords: Time-Varying beta, September 11, MA-GARCH, CAPM

JEL Classification: G1, G12, G15