Hollstein, F, Prokopczuk, M and Wese Simen, C
(2019)
Estimating beta: Forecast adjustments and the impact of stock characteristics for a broad cross-section.
Journal of Financial Markets, 44.
pp. 91-118.
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Beta_Correction.pdf - Author Accepted Manuscript Download (671kB) | Preview |
Abstract
© 2019 Elsevier B.V. Researchers and practitioners face many choices when estimating an asset's sensitivities toward risk factors, i.e., betas. Using the entire U.S. stock universe and a sample period of more than 50 years, we find that a historical estimator based on daily return data with an exponential weighting scheme as well as simple shrinkage adjustments yield the best predictions for future beta. Adjustments for asynchronous trading, macroeconomic conditions, or regression-based combinations, on the other hand, typically yield very high prediction errors and fail to create market-neutral anomaly portfolios. Finally, we document a robust link between stock characteristics and beta predictability.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | 3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services |
| Depositing User: | Symplectic Admin |
| Date Deposited: | 21 Aug 2019 07:47 |
| Last Modified: | 22 Jun 2024 10:43 |
| DOI: | 10.1016/j.finmar.2019.03.001 |
| Related URLs: | |
| URI: | https://livrepository.liverpool.ac.uk/id/eprint/3052274 |
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