The Industrial Relationship in Time-Varying Beta Coefficients in US Industries

This paper examines financial linkage of systematic risks for fourthy-night US industry portfolio returns to the US general economy. Time-varying beta coefficients of Capital Asset Pricing Model (CAPM) are estimated and Granger-causality tests are carried out for identifying the significance of the industrial lead and lags to the general economic cycles measured by US industrial production index. The empirical finding shows that the strength and the causality of international financial linkage vary depending on the types of industry and the shocks in the systematic risk. Some US industries including financing industries, iron and metal industries, service, textile, real estate, shipbuilding and railroad equipment, construction materials and wearing industries are relatively vulnerable to the US general market cycles