|
||||
|
||||
On the Instability of Betas: The Case of Spain
Pablo Fernandez University of Navarra - IESE Business School April 8, 2008 Abstract: It is a big mistake to use betas calculated from historical data to compute the required return to equity. It is a mistake for seven reasons: because betas calculated from historical data change considerably from one day to the next; because calculated betas depend very much on which stock index is used as the market reference; because calculated betas depend very much on which historical period is used to calculate them; because calculated betas depend on what returns (monthly, daily, . . .) are used to calculate them; because very often we do not know if the beta of one company is lower or higher than the beta of another; because calculated betas have little correlation with stock returns; and because the correlation coefficients of the regressions used to calculate the betas are very small.
Keywords: Beta, CAPM, beta-ranked portfolios, historical beta, expected beta JEL Classifications: G12, G31, M21 Working Paper SeriesDate posted: February 29, 2004 ; Last revised: April 09, 2008Suggested CitationContact Information
|
|
||||||||||||||||||||
© 2009 Social Science Electronic Publishing, Inc. All Rights Reserved. Terms of Use Privacy Policy
This page was served by apollo2 in 0.141 seconds.