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Investigation of: "Shopping in the Market-beta Mall"

Author

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  • Edward J. LUSK

    (The State University of New York (SUNY), College at Plattsburgh: School of Business and Economics: Plattsburgh, U.S.A.)

  • Michael HALPERIN

    (University of Pennsylvania, Philadelphia, U.S.A.)

  • Niya STEFANOVA

    (University of Magdeburg, Magdeburg, Germany)

  • Atanas TETIKOV

    (University of Magdeburg, Magdeburg, Germany)

Abstract

Beta, the simple regression slope of the returns of the Firm matched with those of the Market is a powerful financial signaling statistic in vogue since the 1960s, and still very much in use by financial analysts and firm decision makers. However, as there are a number of ways that one can obtain a measure of the period Firm-beta, this begs the following question: Are there important differences in these various betas? If so, this opens up the possibility of agenda-serving game-driven signaling, and thereby compromises the reliability the beta-information. We use the term "Market-beta Mall" to indicate the temptation to go shopping for beta in order to create a profile that would not be consistent as a Time-Benchmark for a particular firm. We show, clearly, that there are different measured values of beta. Given the "adverse" selection implications, we suggest a simple way to maintain the reliably of this critical signal - the period beta.

Suggested Citation

  • Edward J. LUSK & Michael HALPERIN & Niya STEFANOVA & Atanas TETIKOV, 2011. "Investigation of: "Shopping in the Market-beta Mall"," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(5), pages 1-9, August.
    • Handle: RePEc:spp:jkmeit:1167
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    References listed on IDEAS

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    More about this item

    Keywords

    beta source variation; Data Screening; beta-Downloads; beta-Consistency;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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