In search of beta

Alan Gregory; Shan Hua; Rajesh Tharyan

doi:10.1016/j.bar.2017.12.002

In search of beta

Alan Gregory^*, Shan Hua, Rajesh Tharyan

^*Corresponding author for this work

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

3 Citations (Scopus)

Abstract

Despite its limitations, the CAPM is a popular asset pricing model. However, the estimation of beta in the CAPM is affected by the choice of the returns frequency and firm characteristics. This study undertakes a detailed examination of the evidence for the UK and we find that the differences in beta computed from returns of various frequencies are related to size, liquidity, book-to-market and to some degree, opacity factors. One area where our conclusions might have important implications is in the regulatory use of the CAPM. Our results imply that low frequency beta estimates should, in most cases, be preferred to high frequency beta estimates.

Original language	English
Pages (from-to)	425-441
Number of pages	17
Journal	The British Accounting Review
Volume	50
Issue number	4
Early online date	23 Dec 2017
DOIs	https://doi.org/10.1016/j.bar.2017.12.002
Publication status	Published - 1 Jun 2018
Externally published	Yes

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10.1016/j.bar.2017.12.002

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title = "In search of beta",

abstract = "Despite its limitations, the CAPM is a popular asset pricing model. However, the estimation of beta in the CAPM is affected by the choice of the returns frequency and firm characteristics. This study undertakes a detailed examination of the evidence for the UK and we find that the differences in beta computed from returns of various frequencies are related to size, liquidity, book-to-market and to some degree, opacity factors. One area where our conclusions might have important implications is in the regulatory use of the CAPM. Our results imply that low frequency beta estimates should, in most cases, be preferred to high frequency beta estimates.",

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AU - Gregory, Alan

AU - Hua, Shan

AU - Tharyan, Rajesh

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N2 - Despite its limitations, the CAPM is a popular asset pricing model. However, the estimation of beta in the CAPM is affected by the choice of the returns frequency and firm characteristics. This study undertakes a detailed examination of the evidence for the UK and we find that the differences in beta computed from returns of various frequencies are related to size, liquidity, book-to-market and to some degree, opacity factors. One area where our conclusions might have important implications is in the regulatory use of the CAPM. Our results imply that low frequency beta estimates should, in most cases, be preferred to high frequency beta estimates.

AB - Despite its limitations, the CAPM is a popular asset pricing model. However, the estimation of beta in the CAPM is affected by the choice of the returns frequency and firm characteristics. This study undertakes a detailed examination of the evidence for the UK and we find that the differences in beta computed from returns of various frequencies are related to size, liquidity, book-to-market and to some degree, opacity factors. One area where our conclusions might have important implications is in the regulatory use of the CAPM. Our results imply that low frequency beta estimates should, in most cases, be preferred to high frequency beta estimates.

KW - CAPM

KW - Regulatory finance

KW - Beta

U2 - 10.1016/j.bar.2017.12.002

DO - 10.1016/j.bar.2017.12.002

M3 - Article

VL - 50

SP - 425

EP - 441

JO - The British Accounting Review

JF - The British Accounting Review

SN - 0890-8389

IS - 4

ER -

In search of beta

Abstract

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