SEPTEMBER 1975 THE ADJUSTMENT OF BETA FORECASTS ROBERT C. KLEMKOSKY AND JOHN D. MARTIN* THE BETA COEFFICIENT of the market model has gained wide acceptance as a relevant measure of risk in portfolio and security analysis. An essential prerequisite for using beta to assess future portfolio risk and return is a reasonable degree of predictability over future time periods. If the portfolio manager cannot predict future beta coefficients, the applicability of this phase of modern capital-market theory is somewhat restricted. Attempts to predict betas using extrapolative models have met with only limited success, especially for individual securities. Blume  and Levy  found that single security beta coefficients of one period were not good predictors of the corresponding betas in the subsequent period. However, as portfolio size was increased, the stationarity of extrapolated betas improved significantly. A major problem for both single security and portfolio betas was the tendency for relatively high and low beta coefficients to overpredict and underpredict, respectively, the corresponding betas for the subsequent time period. Thus, forecasting accuracy grew progressively worse as beta levels departed significantly from the average. The objectives of this note are to investigate the source of forecast errors of extrapolated
The Journal of Finance – Wiley
Published: Sep 1, 1975
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera