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Betas and Industry Weights

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  • Martin Lally

    (School of Economics and Finance, Victoria University of Wellington, PO Box 600, Wellington, New Zealand.)

Abstract

This paper explores the impact on industry betas of changes to the industry weights in the market index against which betas are defined. The exploratory analysis in the paper suggests that the effect can be substantial This phenomenon has implications for the way in which betas are estimated from time series data, and also for the common practice of using beta estimates from one country to estimate those in another. Possible solutions to the problems arising there from changes or variations in industry weights are suggested.

Suggested Citation

  • Martin Lally, 2004. "Betas and Industry Weights," Australian Journal of Management, Australian School of Business, vol. 29(1), pages 109-120, June.
    • Handle: RePEc:sae:ausman:v:29:y:2004:i:1:p:109-120
    DOI: 10.1177/031289620402900112
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    References listed on IDEAS

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    6. Lally, Martin & Swidler, Steve, 2003. "The effect of an asset's market weight on its beta: implications for international markets," Journal of Multinational Financial Management, Elsevier, vol. 13(2), pages 161-170, April.
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