Applications of state space models in finance

178 Appendix C
Table C.1: Comparison of OLS betas and various conditional beta series.
This table characterizes the various conditional beta series by reporting the mean betas and their range (in parentheses). As the Kalman filter
is likely to produce large outliers in the first stages of estimation, the first fifty conditional beta estimates for any of the chosen techniques to
model conditional betas are not included in the subsequent analyses to avoid an unfair bias against the Kalman filter.
Sector β OLS
β tG
β SV
β RW
β MR
β MMR
β GRW
β MSM
β MS
Automobiles 1.15 1.19 1.17 1.15 1.15 1.15 1.15 1.18 1.20
(0.56;1.71) (0.66;1.52) (0.12;1.61) (0.02;2.37) (−0.18;2.42) (0.43;1.46) (1.07;1.22) (1.03;1.26)
Banks 1.06 1.03 1.03 1.02 1.03 1.03 1.03 1.01 1.04
(0.59;1.49) (0.71;1.34) (0.37;1.34) (−0.16;1.98) (−0.17;2.07) (0.70;1.31) (0.97;1.10) (1.01;1.11)
Basics 0.90 0.96 0.95 0.96 0.94 0.95 0.96 0.95 0.95
(0.51;1.60) (0.62;1.76) (−0.02;1.49) (−0.36;1.62) (−0.38;1.60) (0.50;1.31) (0.82;1.02) (0.84;1.05)
Chemicals 0.91 0.93 0.92 0.91 0.90 0.91 0.94 0.95 0.94
(0.50;1.49) (0.60;1.19) (0.12;1.30) (0.03;1.40) (−0.21;1.56) (0.59;1.17) (0.85;0.98) (0.87;1.00)
Construction 0.89 0.94 0.94 0.96 0.93 0.96 0.96 0.98 0.99
(0.51;1.39) (0.62;1.34) (0.62;1.36) (−0.04;1.58) (0.05;1.59) (0.68;1.25) (0.79;1.07) (0.77;1.14)
Financials 1.00 0.97 0.93 0.94 0.95 0.94 0.95 0.95 0.96
(0.65;1.44) (0.58;1.30) (0.55;1.27) (0.14;2.08) (0.15;2.08) (0.80;1.12) (0.91;1.05) (0.91;1.08)
Food 0.65 0.69 0.68 0.71 0.71 0.71 0.74 0.77 0.76
(0.35;1.18) (0.43;0.93) (−0.35;1.12) (−0.36;1.12) (−0.70;1.25) (0.22;1.12) (0.52;0.89) (0.49;0.91)
Healthcare 0.78 0.84 0.85 0.81 0.81 0.81 0.83 0.83 0.81
(0.38;1.37) (0.48;1.28) (0.06;1.14) (0.01;1.17) (−0.28;1.36) (0.39;1.15) (0.73;0.90) (0.68;0.91)
Industrials 0.98 0.99 0.98 0.99 1.00 1.00 0.98 0.99 0.99
(0.68;1.45) (0.75;1.29) (0.82;1.23) (−0.20;1.84) (−0.17;1.88) (0.81;1.12) (0.97;1.00) (0.96;1.02)
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