Estimating beta

Haim Shalit; Shlomo Yitzhaki

doi:10.1023/A:1014594617251

Estimating beta

Haim Shalit, Shlomo Yitzhaki

Department of Economics

Research output: Contribution to journal › Article › peer-review

29 Scopus citations

Abstract

This paper presents evidence that Ordinary Least Squares estimators of beta coefficients of major firms and portfolios are highly sensitive to observations of extremes in market index returns. This sensitivity is rooted in the inconsistency of the quadratic loss function in financial theory. By introducing considerations of risk aversion into the estimation procedure using alternative estimators derived from Gini measures of variability one can overcome this lack of robustness and improve the reliability of the results.

Original language	English
Pages (from-to)	95-118
Number of pages	24
Journal	Review of Quantitative Finance and Accounting
Volume	18
Issue number	2
DOIs	https://doi.org/10.1023/A:1014594617251
State	Published - 1 Jan 2002

Keywords

Mean-Gini
OLS estimators
Systematic risk

ASJC Scopus subject areas

Accounting
General Business, Management and Accounting
Finance

Access to Document

10.1023/A:1014594617251

Cite this

@article{48b55bcb76da4b00b2780ead683c2fd7,

title = "Estimating beta",

abstract = "This paper presents evidence that Ordinary Least Squares estimators of beta coefficients of major firms and portfolios are highly sensitive to observations of extremes in market index returns. This sensitivity is rooted in the inconsistency of the quadratic loss function in financial theory. By introducing considerations of risk aversion into the estimation procedure using alternative estimators derived from Gini measures of variability one can overcome this lack of robustness and improve the reliability of the results.",

keywords = "Mean-Gini, OLS estimators, Systematic risk",

author = "Haim Shalit and Shlomo Yitzhaki",

year = "2002",

month = jan,

day = "1",

doi = "10.1023/A:1014594617251",

language = "English",

volume = "18",

pages = "95--118",

journal = "Review of Quantitative Finance and Accounting",

issn = "0924-865X",

publisher = "Springer New York",

number = "2",

}

TY - JOUR

T1 - Estimating beta

AU - Shalit, Haim

AU - Yitzhaki, Shlomo

PY - 2002/1/1

Y1 - 2002/1/1

N2 - This paper presents evidence that Ordinary Least Squares estimators of beta coefficients of major firms and portfolios are highly sensitive to observations of extremes in market index returns. This sensitivity is rooted in the inconsistency of the quadratic loss function in financial theory. By introducing considerations of risk aversion into the estimation procedure using alternative estimators derived from Gini measures of variability one can overcome this lack of robustness and improve the reliability of the results.

AB - This paper presents evidence that Ordinary Least Squares estimators of beta coefficients of major firms and portfolios are highly sensitive to observations of extremes in market index returns. This sensitivity is rooted in the inconsistency of the quadratic loss function in financial theory. By introducing considerations of risk aversion into the estimation procedure using alternative estimators derived from Gini measures of variability one can overcome this lack of robustness and improve the reliability of the results.

KW - Mean-Gini

KW - OLS estimators

KW - Systematic risk

UR - http://www.scopus.com/inward/record.url?scp=14844288612&partnerID=8YFLogxK

U2 - 10.1023/A:1014594617251

DO - 10.1023/A:1014594617251

M3 - Article

AN - SCOPUS:14844288612

SN - 0924-865X

VL - 18

SP - 95

EP - 118

JO - Review of Quantitative Finance and Accounting

JF - Review of Quantitative Finance and Accounting

IS - 2

ER -

Estimating beta

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this