Rossi, Francesco (2011): Risk components in UK cross-sectional equities: evidence of regimes and overstated parametric estimates.
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We study the behavior and interaction of systematic and idiosyncratic components of risk in a cross-section of U.K. stocks. We find no clear evidence of a trend in any component of total risk, but we document different “regimes” in the behavior of each component of total risk, in their correlation patterns and thus in their contribution to aggregate risk. Comparing parametric and non-parametric estimates of residual risk, we find the former to significantly overstate diversifiable risk, opposite to some previous findings for the U.S. market, with the difference being very large especially when we include an industry component.
|Item Type:||MPRA Paper|
|Original Title:||Risk components in UK cross-sectional equities: evidence of regimes and overstated parametric estimates|
|Keywords:||Idiosyncratic risk; residual risk; systematic risk; non parametric estimates; cross-sectional equities; cross-sectional risk; equities; U.K.; industry risk; correlation; regimes; factor models;|
|Subjects:||G - Financial Economics > G1 - General Financial Markets
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General
G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
G - Financial Economics > G1 - General Financial Markets > G10 - General
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C21 - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
|Depositing User:||Francesco Rossi|
|Date Deposited:||11. May 2012 04:50|
|Last Modified:||22. Feb 2013 08:03|
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