The systematic risk of IPO’s in the thinly traded Istanbul Stock Exchange (ISE) are estimated using Empirical Bayes Estimators (EBE). The sectors that the firms belong to, provide the priors. Comparisons are made with OLS estimators across different estimation and forecasting periods. Two benchmark criteria are used; sum of squared residuals and sum of absolute residuals. The application requires some complicated manipulation of the theory where some inferiors of the ordinary Bayesian approach are avoided. Results show that using the EBE procedure, betas can be calculated with greater precision than OLS. This enables us to evaluate IPO’s on similar intuition with other stocks, i.e. in a portfolio context rather than in isolation.
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
13879.
Length: Date of creation: 2003 Date of revision: Publication status: Published in International Journal of Business 8.3(2003): pp. 315-334 Handle: RePEc:pra:mprapa:13879
Find related papers by JEL classification: G12 - Financial Economics - - General Financial Markets - - - Asset Pricing C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis
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