Long- and short-run components of factor betas : Implications for stock pricing
We propose a new model that estimates the long- and short-run components of the variances and covariances. The advantage of our model to the existing DCC-based models is that it uses the same form for both the variances and covariances and estimates these moments simultaneously. We apply this model to obtain long- and short-run factor betas for industry test portfolios. We find that the risk premi
