Kellogg School of Management
2211 Campus dr
Evanston, IL 60208
Institutional Affiliation: Northwestern University
NBER Working Papers and Publications
|September 2019||Cross-Sectional Dispersion of Risk in Trading Time|
with Torben G. Andersen, Viktor Todorov: w26329
We study the temporal behavior of the cross-sectional distribution of assets' market exposure, or betas, using a large panel of high-frequency returns. The asymptotic setup has the sampling frequency of the returns increasing to infinity, while the time span of the data remains fixed, and the cross-sectional dimension is fixed or increasing. We derive a Central Limit Theorem (CLT) for the cross-sectional beta dispersion at a point in time, enabling us to test whether this quantity varies across the trading day. We further derive a functional CLT for the dispersion statistics, allowing us to test if the beta dispersion, as a function of time-of-day, changes across days. We extend this further by developing inference techniques for the entire cross-sectional beta distribution at fixed point...