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.
Review of Quantitative Finance and Accounting – Springer Journals
Published: Oct 19, 2004
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