Investment horizon dependent CAPM : adjusting beta for long-term dependence

Número: 
730
Publicado: 
Clasificación JEL: 
G12, G14, G32, G20, C14
Palabras clave: 
CAPM, Hurst exponent, long-term dependence, Fractional Brownian Motion

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Luis E. Arango, Leonardo Bonilla-Mejía, Luz Adriana Flórez, Luis E. Arango
Julián Andrés Parra-Polanía, Constanza Martínez-Ventura

Financial basics and intuition stresses the importance of investment horizon for risk management and asset allocation. However, the beta parameter of the Capital Asset Pricing Model (CAPM) is invariant to the holding period. Such contradiction is due to t