Sensitivity of Systematic Risk Estimates to the Return Measurement Interval Under Serial Correlation

Sensitivity of Systematic Risk Estimates to the Return Measurement Interval Under Serial Correlation This paper analytically and empirically investigates the sensitivity of the return measurement interval to the market beta estimate and suggests a market beta estimation method incorporating the investment horizon through a vector autoregressive (VAR) model when there is serial correlation in returns. The analytical relation between the beta estimate and the return measurement interval is obtained. Based on the analytical relation, a decision function for the intervalling effect is provided. It is found that the intervalling effect is mostly caused by January returns. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Sensitivity of Systematic Risk Estimates to the Return Measurement Interval Under Serial Correlation

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by 1999 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands.
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1008368524904
Publisher site
See Article on Publisher Site

Abstract

This paper analytically and empirically investigates the sensitivity of the return measurement interval to the market beta estimate and suggests a market beta estimation method incorporating the investment horizon through a vector autoregressive (VAR) model when there is serial correlation in returns. The analytical relation between the beta estimate and the return measurement interval is obtained. Based on the analytical relation, a decision function for the intervalling effect is provided. It is found that the intervalling effect is mostly caused by January returns.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Oct 19, 2004

References

  • Risk, the Pricing of Capital Assets, and the Evaluation of Investment Portfolio
    Jensen, M.C.
  • Capital asset prices: a theory of Market Equilibrium under Conditions of Risk
    Sharpe, W.F.

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