Title: Approaches to beta estimation: an empirical study
Abstract: Estimation of systematic risk is one of the most critical topics in finance. As a relevant measure of risk in security analysis, the beta coefficient has been widely used in the recent past. The power of measuring the ex-ante security risk highly depends on the degree of predictability and the temporal stability of security betas over future time periods. For beta predictions, like all the other predictions in economics, the simplest method is to assume that the future will be like the past. Historical betas could then be used directly. But such methods rest on the assumption that the underlying processes must stable over time and the past record is an adequate reflector of their essential characteristics.
Publication Year: 2011
Publication Date: 2011-01-01
Language: en
Type: article
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