Estimating Systematic Risk – The Return Interval and Estimation Period Issues Evidence from Malaysia 2000-2006
Estimating the beta coefficient is central to the CAPM concept of rewarding the investors according to the systematic risk of an asset. However, while the concept is intuitively appealing, the estimation is biased by measurement issues such as thin trading, regression tendency, stability and choice...
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my-inti-eprints.15112021-07-10T12:06:46Z http://eprints.intimal.edu.my/1511/ Estimating Systematic Risk – The Return Interval and Estimation Period Issues Evidence from Malaysia 2000-2006 Ho, Catherine, Soke Fun Chen, Yin Foo H Social Sciences (General) HB Economic Theory Estimating the beta coefficient is central to the CAPM concept of rewarding the investors according to the systematic risk of an asset. However, while the concept is intuitively appealing, the estimation is biased by measurement issues such as thin trading, regression tendency, stability and choice of interval issues. While techniques have been developed to address the regression tendency, thin trading biases, no specific rules on the interval issues have been formulated. The trade-off between a longer estimation period for more observations and accuracy has to be weighted for a biased coefficient resulting from higher measurement errors. The results for this study provided support that daily returns provided the most efficient estimation in terms of smallest estimated coefficient errors but biased as any estimation period more than three years saw half of the sample experiencing a shift in their estimated beta. INTI International University 2009 Article PeerReviewed text en http://eprints.intimal.edu.my/1511/1/2009_p44.pdf Ho, Catherine, Soke Fun and Chen, Yin Foo (2009) Estimating Systematic Risk – The Return Interval and Estimation Period Issues Evidence from Malaysia 2000-2006. INTI JOURNAL, 2009. pp. 44-52. ISSN e2600-7320 https://intijournal.intimal.edu.my/intijournal.htm |
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H Social Sciences (General) HB Economic Theory Ho, Catherine, Soke Fun Chen, Yin Foo Estimating Systematic Risk – The Return Interval and Estimation Period Issues Evidence from Malaysia 2000-2006 |
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Estimating the beta coefficient is central to the CAPM concept of rewarding the investors according to the systematic risk of an asset. However, while the concept is intuitively appealing, the estimation is biased by measurement issues such as thin trading, regression tendency, stability and choice of interval issues. While techniques have been developed to address the regression tendency, thin trading biases, no specific rules on the interval issues have been formulated. The trade-off between a longer estimation period for more observations and accuracy has to be weighted for a biased coefficient resulting from higher measurement errors. The results for this study provided support that daily returns provided the most efficient estimation in terms of smallest estimated coefficient errors but biased as any estimation period more than three years saw half of the sample experiencing a shift in their estimated beta. |
format |
Article |
author |
Ho, Catherine, Soke Fun Chen, Yin Foo |
author_facet |
Ho, Catherine, Soke Fun Chen, Yin Foo |
author_sort |
Ho, Catherine, Soke Fun |
title |
Estimating Systematic Risk – The Return Interval and Estimation Period Issues Evidence from Malaysia 2000-2006 |
title_short |
Estimating Systematic Risk – The Return Interval and Estimation Period Issues Evidence from Malaysia 2000-2006 |
title_full |
Estimating Systematic Risk – The Return Interval and Estimation Period Issues Evidence from Malaysia 2000-2006 |
title_fullStr |
Estimating Systematic Risk – The Return Interval and Estimation Period Issues Evidence from Malaysia 2000-2006 |
title_full_unstemmed |
Estimating Systematic Risk – The Return Interval and Estimation Period Issues Evidence from Malaysia 2000-2006 |
title_sort |
estimating systematic risk – the return interval and estimation period issues evidence from malaysia 2000-2006 |
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INTI International University |
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2009 |
url |
http://eprints.intimal.edu.my/1511/1/2009_p44.pdf http://eprints.intimal.edu.my/1511/ https://intijournal.intimal.edu.my/intijournal.htm |
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