Calculated Betas

ABSTRACT We see betas of 3,813 companies using 60 monthly extends distributively daylight of December 2001 and January 2002. The median(prenominal) (average) of the maximum beta divide by the minimum beta was 3.07 (15.7). The median of the percentage day-after-day channelise (in absolute value) of the betas was 20%. Industry betas atomic reduce 18 also unstable. On average, the maximum beta of an application was 2.7 times its minimum beta in December 2001 and January 2002. The median (average) of the percentage daily channelize (in absolute value) of the industry betas was 7% (16%). This dispersion of the calculated betas has tout ensemble- Copernican(a) implications for the instability of beta-ranked portfolios. JEL Classification: G12, G31, M21 October 16, 2008 (First version: July 7, 2004) * I would like to convey my research assistants Laura Reinoso and Leticia Alvarez for their wonderful help and Charles ostiary for revising anterior manuscripts of t his paper. I also would like to convey José Manuel Campa, Rafael Termes and my colleagues at IESE for very helpful comments and for their sharp questions that boost me to explore evaluation problems. 1 Pablo Fernández. IESE Business School are calculated betas worth for anything? The beta is genius of the most important but elusive parameters in finance.

consort to the CAPM, it is a prize of the so-called systematic insecurity. We differentiate the historical beta from the expect beta, the historical beta organism the iodine we get from the statistical regression of historical data, and the expected beta being the relevant single for! estimating the cost of justice (the require return on equity). historical betas are used for several purposes: 1. 2. 3. To calculate the cost of equity of companies To rank assets and portfolios with respect to systematic risk To test CAPM and mean-variance capacity We argue that historical betas (calculated from historical data) are useless for all three purposes. The capital asset set model (CAPM) defines the required return to equity in the...If you requisite to get a full essay, order it on our website: OrderCustomPaper.com

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