On the Assessment of Beta Before World War I: Case Study of Brussels Stock Exchange (BSE)

34 Pages Posted: 29 Jul 2012 Last revised: 31 Jul 2012

See all articles by Lord Mensah

Lord Mensah

University of Ghana Business School; University of Ghana - Business School

Jan Annaert

University of Antwerp Department of Accounting & Finance; University of Antwerp - Antwerp Management School

Date Written: April 9, 2009

Abstract

This paper uses completely new data to study the variations in beta when it deviates from the constancy assumption presumed by the market model. The concentration of the various researches on beta based on post 1926 data makes the 19th century Brussels Stock Exchange (BSE) data a very good out-sample dataset to test beta variations. Various models proposed in the literature to capture the variations in beta were studied. Blume’s correlation techniques reveal that beta is not stable at the individual stocks level and that the stability can be improved by portfolio formation. Using root mean square error (RMSE) criterion, it was shown that the market model betas are weak in predicting future betas. The predictability can be improved by adjusting betas with the Blume and Vasicek mean reversion techniques. Further results from this study reveal that few stocks have lead or lag relationship with the market index. Small sized stocks were detected to be more prone to outliers.

Keywords: Historical Beta Estimation, Brussels Stock Exchange

JEL Classification: G10, G11, G12

Suggested Citation

Mensah, Lord and Annaert, Jan, On the Assessment of Beta Before World War I: Case Study of Brussels Stock Exchange (BSE) (April 9, 2009). Available at SSRN: https://ssrn.com/abstract=2119250 or http://dx.doi.org/10.2139/ssrn.2119250

Lord Mensah (Contact Author)

University of Ghana Business School ( email )

Department of Finance
Legon- Accra
Ghana

University of Ghana - Business School ( email )

P.O. Box LG 78
Legon
Accra, Greater Accra LG 78
Ghana

Jan Annaert

University of Antwerp Department of Accounting & Finance ( email )

Faculty of Applied Economics
Prinsstraat 13
Antwerp, B-2000
Belgium

HOME PAGE: http://https://www.uantwerp.be/en/staff/jan-annaert/

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
42
Abstract Views
376
PlumX Metrics