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Measuring the stock's factor beta and identifying risk factors under market inefficiency

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  • Semenov, Andrei

Abstract

We provide a closed-form measure of the stock's factor-specific beta coefficient that allows for a delay in the reaction of stock prices to systematic information. This measure explicitly relates the stock's factor beta to the investment horizon and enables investors to determine the return measurement interval that is required for the stock's factor beta to fully reflect the stock's factor risk. Exploiting daily data on individual NYSE, Nasdaq, and AMEX-listed common stocks, we use this measure to estimate and investigate the properties of the stock's beta with respect to the market.

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  • Semenov, Andrei, 2021. "Measuring the stock's factor beta and identifying risk factors under market inefficiency," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 635-649.
  • Handle: RePEc:eee:quaeco:v:80:y:2021:i:c:p:635-649
    DOI: 10.1016/j.qref.2021.03.014
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    More about this item

    Keywords

    Equity risk premium; Factor beta; Multi-Factor asset pricing model; Systematic risk;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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