Time-Varying Beta in Functional Factor Models: Evidence from China

37 Pages Posted: 12 Nov 2019

See all articles by Lajos Horváth

Lajos Horváth

University of Utah - Department of Mathematics

Bo Li

Beijing International Studies University

Hemei Li

Renmin University of China - School of Finance

Zhenya Liu

Renmin University of China; CERGAM, Aix-Marseille University

Date Written: November 2, 2019

Abstract

This paper introduces the functional factor models with the time-varying beta. The advantage of doing this is that functional factor models give the time-varying beta intuitively, from which we find that in the Chinese A-share market, with both the Fama-French 3-factor model and the 5-factor model, the market factor has a positive e ect on excess returns of A shares all the time, the size factor and the value factor have a positive impact on excess returns of A shares in a stable period, the investment factor had a positive e ect after the non-tradable share reform and has changed to a negative impact since the 2008 financial crisis, while the profitability factor always has a negative impact on A shares.

Keywords: Functional Factor Models, Time-Varying Beta, Functional Data Analysis

JEL Classification: C31, C32, C51, G12

Suggested Citation

Horváth, Lajos and Li, Bo and Li, Hemei and Liu, Zhenya, Time-Varying Beta in Functional Factor Models: Evidence from China (November 2, 2019). Available at SSRN: https://ssrn.com/abstract=3479535 or http://dx.doi.org/10.2139/ssrn.3479535

Lajos Horváth

University of Utah - Department of Mathematics ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States
801 581-8159 (Phone)

Bo Li

Beijing International Studies University ( email )

Beijing, 100024
China

Hemei Li

Renmin University of China - School of Finance ( email )

Ming De Main Building
Renmin University of China
Beijing, Beijing 100872
China

Zhenya Liu (Contact Author)

Renmin University of China ( email )

School of Finance
Beijing, Beijing 100872
China

CERGAM, Aix-Marseille University ( email )

Aix-Marseille University
3 Avenue Robert Schuman,
Aix-en-Provence, 13628
France
0781668685 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
20
Abstract Views
123
PlumX Metrics