Non-Myopic Betas
Event details
| Date | 06.11.2015 |
| Hour | 10:30 › 12:00 |
| Speaker | Grigory VILKOV (Frankfurt School of Finance & Management) |
| Location | |
| Category | Conferences - Seminars |
We introduce non-myopic mean-variance optimizing agents into the standard conditional CAPM. In equilibrium, the inter-temporal hedging demand of non-myopic investors leads to a two-factor CAPM in which risk premiums are determined both by the market portfolio beta (the myopic beta) and by the non-myopic beta of returns with respect to the future return on the mean-variance efficient portfolio. We show empirically that the new risk factor is priced in the cross-section of stock returns, and the link between expected returns and non-myopic betas is monotonically increasing. The model makes several predictions about equilibrium beta dynamics that are confirmed by the data. Using a cross-section of mutual fund returns, we find that their non-myopic betas explain a significant part of the variation in mutual fund alphas, suggesting that non-myopic behavior is an important component of alpha generation.
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