caa a22 4500 378876902 CHVBK 20180305123422.0 cr unu---uuuuu 161128e20030311xx s 000 0 eng 10.2202/1558-3708.1101 doi (NATIONALLICENCE)gruyter-10.2202/1558-3708.1101 Time-Varying Betas Help in Asset Pricing: The Threshold CAPM [Elektronische Daten] [Levent Akdeniz, Aslihan Altay-Salih, Mehmet Caner] Although there is a consensus about time variation in market betas, it is not clear how this variation should be captured. Several researchers continue to analyze different versions of the conditional CAPM. However, Ghysels (1998) shows that these conditional CAPM models fail to capture the dynamics of beta risk. In this study, we introduce a new model, threshold CAPM, which outperforms both the conditional and unconditional CAPMs by generating smaller pricing errors. We also show that the beta risk changes through time with the changes in the economic environment and the dynamics of time variation of beta differ across industries. These findings have important implications for asset allocation, portfolio selection, and hedging decisions. ©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston Akdeniz Levent Bilkent University, Graduate School of Business, akdeniz@bilkent.edu.tr aut Altay-Salih Aslihan Bilkent University, Graduate School of Business, asalih@bilkent.edu.tr aut Caner Mehmet University of Pittsburgh, Department of Economics, caner@pitt.edu aut Studies in Nonlinear Dynamics & Econometrics De Gruyter 6/4(2003-03-11) 6:4 2003 6 snde https://doi.org/10.2202/1558-3708.1101 text/html Onlinezugriff via DOI 1 research article jats NATIONALLICENCE 856 40 https://doi.org/10.2202/1558-3708.1101 text/html Onlinezugriff via DOI NATIONALLICENCE 700 1- Akdeniz Levent Bilkent University, Graduate School of Business, akdeniz@bilkent.edu.tr aut NATIONALLICENCE 700 1- Altay-Salih Aslihan Bilkent University, Graduate School of Business, asalih@bilkent.edu.tr aut NATIONALLICENCE 700 1- Caner Mehmet University of Pittsburgh, Department of Economics, caner@pitt.edu aut NATIONALLICENCE 773 0- Studies in Nonlinear Dynamics & Econometrics De Gruyter 6/4(2003-03-11) 6:4 2003 6 snde CC0 http://creativecommons.org/publicdomain/zero/1.0 nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-gruyter