The classic estimates of CAPM equity betas are notoriously unstable. We suppose that this is mainly due to changes of firm’s leverage over time. In order to take leverage into account, we propose a new approach where asset correlations among firms are pairwise constant, while equity correlations depend on the stochastic evolution of firms’ asset values.

Deleveraging CAPM: Asset Betas vs. Equity Betas / Barone, Gaia. - (2016).

Deleveraging CAPM: Asset Betas vs. Equity Betas

BARONE, GAIA
2016

Abstract

The classic estimates of CAPM equity betas are notoriously unstable. We suppose that this is mainly due to changes of firm’s leverage over time. In order to take leverage into account, we propose a new approach where asset correlations among firms are pairwise constant, while equity correlations depend on the stochastic evolution of firms’ asset values.
Asset management, derivatives, corporate finance, risk management
Deleveraging CAPM: Asset Betas vs. Equity Betas / Barone, Gaia. - (2016).
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/173266
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