By Hao Sun. Data Financial and Food Stocks from S&P100 Index Include: BAC, BK, GS, JPM, MS, NYX, WFC, HNZ, KO, KFT, PEP Also used S&P100 Futures as the.

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Presentation transcript:

By Hao Sun

Data Financial and Food Stocks from S&P100 Index Include: BAC, BK, GS, JPM, MS, NYX, WFC, HNZ, KO, KFT, PEP Also used S&P100 Futures as the market index for CAPM model

Model

Method

Numerical Results StockContribution of Jump BAC (0.2533) BK (0.2905) GS (0.2690) JPM (0.2560) MS (0.3268) NYX (0.3918) WFC e-004 (0.2532)

Calculations vs. Regression StockRealized BetaBeta from monthly Reg. BAC (0.4386) (0.0357) BK (0.3790) (0.0206) GS (0.3895) (0.0282) JPM (0.3702) (0.0251) MS (0.5228) (0.0528) NYX (0.5141) (0.0444) WFC (0.4348) (0.0266)

JPM 3-mth Moving Avg. R-Beta

Food&Beverages StockRealized BetaBi-Power Beta HNZ (0.2284) (0.2750) KFT (0.2535) (0.2945) KO (0.2754) (0.3276) PEP (0.2612) (0.3356)

Conclusion Jump Contributions are not significant to beta. In other words, market systematic risks are not affected jumps in prices of individual stocks. So CAPM model will not be affected by outliers in returns as some papers claim (Martin, Simin, 2003) During periods of financial stress, Financial firms tend to have a beta above 1. On the contrary, the beta of Food&Beverage Providers remain low during financial stress. (Some even decrease) In general, financial firms have higher beta.