Analyse Temps-fréquence du MEDAF –Application au CAC 40 –

MESTRE, Roman and Terraza, Michel (2017): Analyse Temps-fréquence du MEDAF –Application au CAC 40 –.

Abstract

The market’s line estimation implicitly assumes that its parameters are constant over time. Investors, who use the beta of this line for build their portfolio, have a similar behavior whatever their investment horizon. We discuss this hypothesis in this article using the technique of wavelets providing the time evolution of different frequencies trading. We have a sample period 2005 - 2015 covering both quiet and disturbed fluctuations of the CAC 40 and its components. We verify the expected result of market's line statistical weaknesses and the high volatility of its parameters. We show that there is a market 's line which differs over time, revealing significant changes of the beta, and we use this results to group the components of the CAC according to their characteristics. The use of wavelets notably improves our results and user's choice concerning his portfolios elaboration according to the horizon of its investments. Particularly, we show that keep overall market's line, whatever the period, is equivalent to consider stock selection by the beta for a short-term horizon. So we propose a methodology based on time-frequency analysis that lead to an overview of stock characteristics useful to portfolio managers.

• Item Type: MPRA Paper
• English Title: Time-Frequency Analysis of CAPM- Application to the CAC 40-
• Language: French
• Keywords: Market Line, Wavelets, MODWT, Frequency Betas
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; G - Financial Economics > G0 - General > G00 - General; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates

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