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The impact of infrequent trading on betas based on daily, weekly and monthly return intervals : empirical evidence with Finnish data

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  • Teppo Martikainen

    (University of Vaasa)

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    Abstract

    This paper examines the empirical properties of common stock systematic risk estimates measured from daily, weekly and monthly return intervals in the Finnish stock market. Firstly, the effects of infrequent trading on betas measured from the three return intervals are analysed. Secondly, it is aimed to find out whether the differences in the stability of the selected systematic risk estimates can be explained by infrequent trading. Thirdly, the linear risk-return relationship suggested by the CAPM is tested using the different systematic risk estimates. In addition, two widely discussed anomalies, the size-effect and the E/P-effect, are focused in this context.

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    File URL: http://taloustieteellinenyhdistys.fi/images/stories/fep/f1991_1e.pdf
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    Bibliographic Info

    Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

    Volume (Year): 4 (1991)
    Issue (Month): 1 (Spring)
    Pages: 52-64

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    Handle: RePEc:fep:journl:v:4:y:1991:i:1:p:52-64

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    Web page: http://www.taloustieteellinenyhdistys.fi
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    1. Stoll, Hans R. & Whaley, Robert E., 1983. "Transaction costs and the small firm effect," Journal of Financial Economics, Elsevier, vol. 12(1), pages 57-79, June.
    2. Jaffe, Jeffrey & Keim, Donald B & Westerfield, Randolph, 1989. " Earnings Yields, Market Values, and Stock Returns," Journal of Finance, American Finance Association, vol. 44(1), pages 135-48, March.
    3. Dimson, E & Marsh, P R, 1983. " The Stability of UK Risk Measures and the Problem of Thin Trading," Journal of Finance, American Finance Association, vol. 38(3), pages 753-83, June.
    4. Roll, Richard, 1983. "On computing mean returns and the small firm premium," Journal of Financial Economics, Elsevier, vol. 12(3), pages 371-386, November.
    5. Berglund, Tom & Liljeblom, Eva, 1988. " Market Serial Correlation on a Small Security Market: A Note," Journal of Finance, American Finance Association, vol. 43(5), pages 1265-74, December.
    6. Cook, Thomas J. & Rozeff, Michael S., 1984. "Size and Earnings/Price Ratio Anomalies: One Effect or Two?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(04), pages 449-466, December.
    7. Yli-Olli, P & Virtanen, I & Martikainen, T, 1990. "Common factors in the arbitrage pricing model in two Scandinavian countries," Omega, Elsevier, vol. 18(6), pages 615-624.
    8. Levis, Mario, 1989. "Stock market anomalies: A re-assessment based on the UK evidence," Journal of Banking & Finance, Elsevier, vol. 13(4-5), pages 675-696, September.
    9. Handa, Puneet & Kothari, S. P. & Wasley, Charles, 1989. "The relation between the return interval and betas : Implications for the size effect," Journal of Financial Economics, Elsevier, vol. 23(1), pages 79-100, June.
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    Cited by:
    1. Mika Vaihekoski, 1998. "Short-term returns and the predictability of Finnish stock returns," Finnish Economic Papers, Finnish Economic Association, vol. 11(1), pages 19-36, Spring.

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