Beta Across Return Measurement Intervals

Is there a distinct systematic asset risk, as measured by its market beta, associated with each return measurement interval (frequency, such as daily, monthly or annually)? In other words, is return measurement frequency a risk factor? In their October 2018 paper entitled “Measuring Horizon-Specific Systematic Risk via Spectral Betas”, Federico Bandi, Shomesh Chaudhuri, Andrew Lo and Andrea Tamoni  introduce spectral beta, an asset’s market beta for a given return measurement frequency, as a way to assess this frequency as a source of systematic investment risk. They specify how to combine spectral betas into an overall beta and explore ways to interpret and exploit spectral betas. Using mathematical derivations and samples of monthly and daily returns for broad samples of U.S. stocks and stock portfolios, they find that: (more…)