Hostname: page-component-6bb9c88b65-zjgpb Total loading time: 0 Render date: 2025-07-23T11:06:37.925Z Has data issue: false hasContentIssue false
  • English
  • Français

On the Estimation and Stability of Beta

Published online by Cambridge University Press:  06 April 2009

Gordon J. Alexander  and
Norman L. Chervany
Get access Rights & Permissions [Opens in a new window]

Extract

Beta coefficients were initially defined by Sharpe [11] as the slope term in the simple linear regression function where the rate of return on a market index was the independent variable and a security's rate of return was the dependent variable. As indicated by Brenner and Smidt [4], accurate estimation of beta coefficients is important for at least two reasons. First, they are important for understanding risk-return relationships in capital market theory. Second, they are important for use in making investment decisions. Some confusion has appeared, however, in recent research regarding both the optimal estimation interval and the intertemporal stability of beta coefficients. The purpose of this paper is to examine this confusion and present new evidence on the estimation and stability of beta.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 15 , Issue 1 , March 1980 , pp. 123 - 137
Copyright
Copyright © School of Business Administration, University of Washington 1980

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

REFERENCES

1Baesel, Jerome B. “On the Assessment of Risk: Some Further Considerations.” Journal of Finance, Vol. 29 (12 1974), pp. 1491–1494.CrossRefGoogle Scholar
2Blume, Marshall E. “On the Assessment of Risk.” Journal of Finance, Vol. 26 (03 1971), pp. 1–10.CrossRefGoogle Scholar
3Blume, Marshall E. “Betas and Their Regression Tendencies.” Journal of Finance, Vol. 30 (06 1975), pp. 785–795.CrossRefGoogle Scholar
4Brenner, Menachem, and Smidt, Seymour. “A Simple Model of Non-Stationarity of Systematic Risk.” Journal of Finance, Vol. 32 (09 1977), pp. 1081–1092.Google Scholar
5Eubank, Arthur A. Jr, and Zumwalt, J. Kenton. “The Forecast Error Impact of Alternative Length Beta Estimation Periods, Adjustment Techniques, and Risk Classes.” Paper presented at 1977 Western Finance Association Meeting.CrossRefGoogle Scholar
6Gonedes, Nicholas J. “Evidence on the Information Content of Accounting Numbers: Accounting-based and Market-based Estimates of Systematic Risk.” Journal of Financial and Quantitative Analysis, Vol. 8 (06 1973), pp. 407–443.CrossRefGoogle Scholar
7Klemkosky, Robert C, and Martin, John D.. “The Adjustment of Beta Forecasts.” Journal of Finance, Vol. 30 (09 1975), pp. 1123–1128.CrossRefGoogle Scholar
8Levy, Robert A. “Stationarity of Beta Coefficients.” Financial Analysts Journal, Vol. 27 (11–-12 1971), pp. 55–62.CrossRefGoogle Scholar
9Mood, Alexander M.; Graybill, Franklin A.; and Boes, Duane C.. Introduction to the Theory of Statistics, 3rd ed. New York: McGraw-Hill (1974).Google Scholar
10Porter, R. Burr, and Ezzell, John R.. “A Note on the Predictive Ability of Beta Coefficients.” Journal of Business Research, Vol. 3 (10 1975), pp. 367–372.CrossRefGoogle Scholar
11Sharpe, William F. “A Simplified Model for Portfolio Analysis.” Management Science, Vol. 9 (01 1963), pp. 277–293.CrossRefGoogle Scholar
12Sharpe, William F., and Cooper, Guy M.. “Risk-Return Classes of New York Stock Exchange Common Stocks.” Financial Analysts Journal, Vol. 28 (03–04 1972), 46ff.CrossRefGoogle Scholar
13Vasicek, Oldrich A. “A Note on Using Cross-Sectional Information in Bayesian Estimation of Security Betas.” Journal of Finance, Vol. 28 (12 1973), pp. 1233–1239.Google Scholar
14Winkler, Robert L., and Hays, William L.. Statistics, 2nd ed. New York: Holt, Rinehart and Winston (1975).Google Scholar