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Are calculated betas good for anything?

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  • Fernandez, Pablo

    (IESE Business School)

Abstract

We calculate betas of 3,813 companies using 60 monthly returns each day of December 2001 and January 2002. The median (average) of the maximum beta divided by the minimum beta was 3.07 (15.7). The median of the percentage daily change (in absolute value) of the betas was 20%. Industry betas are also unstable. On average, the maximum beta of an industry was 2.7 times its minimum beta in December 2001 and January 2002. The median (average) of the percentage daily change (in absolute value) of the industry betas was 7% (16%). This dispersion of the calculated betas has important implications for the instability of beta-ranked portfolios.

Suggested Citation

  • Fernandez, Pablo, 2004. "Are calculated betas good for anything?," IESE Research Papers D/555, IESE Business School.
    • Handle: RePEc:ebg:iesewp:d-0555
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    Cited by:

    1. Wang, Daxue, 2008. "Herd behavior towards the market index: Evidence from 21 financial markets," IESE Research Papers D/776, IESE Business School.
    2. TILEAGA Cosmin & NITU Oana & NITU Claudiu Valentin, 2014. "Methods For Estimating The Cost Of Capital," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 66(4), pages 7-19.

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    More about this item

    Keywords

    beta; historical beta; expected beta; systematic risk; cost equity;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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