Determinants of market beta: the impacts of firm-specific accounting figures and market conditions

Determinants of market beta: the impacts of firm-specific accounting figures and market conditions This article examines and extends research on the relation between the capital asset pricing model market beta, accounting risk measures and macroeconomic risk factors. We employ a beta decomposition approach that nests competing models with different business risk proxies and allows to frame cross-model comparison. Because model tests require estimated independent variables resulting in measurement error, we empirically estimate three comparable model specifications with instrumental variable estimators and for the first time provide thorough instrument diagnostics in this setting. Correcting for the heretofore neglected weak instruments problem we find that growth risk (i.e., the risk of firm sales variations that are inconsistent with the market wide trends), is the business risk that explains cross-sectional variations in market beta best. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Determinants of market beta: the impacts of firm-specific accounting figures and market conditions

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Publisher
Springer US
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-013-0352-1
Publisher site
See Article on Publisher Site

References

  • Consistent model and moment selection procedures for GMM estimation with application to dynamic panel data models
    Andrews, DWK; Lu, B
  • Instrumental variables vs. grouping approach for reducing bias due to measurement error
    Batistatou, E; McNamee, R

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