ETF Betas: A Study of their Estimation Sensitivity to Varying Time Intervals

“ETF Betas: A Study of their Estimation Sensitivity to Varying Time Intervals”, Pankaj Agrrawal and John M. Clark, Institutional Investor Journals, ETF and Indexing, Vol. 41 (10), pp. 96-103, Fall 2007.

Posted: 4 Aug 2015 Last revised: 12 Nov 2017

See all articles by Pankaj Agrrawal

Pankaj Agrrawal

University of Maine

John M. Clark

University of Southern Mississippi - College of Business Administration - Economics, Finance, & International Business

Date Written: 2007

Abstract

This article presents an analysis of time dependent factors that influence the stability of beta in the ETF market. The results indicate that the calculated betas for ETFs are significantly dependent on the choice of time interval used in their calculation. In addition, daily and weekly return frequencies are analyzed, and the results indicate that return frequency does not significantly affect the beta estimate, as long as the estimation intervals are similar or overlapping. Due to the observed differences in beta calculated using a shorter estimation window relative to those using a longer estimation window, it is recommended that the duration of the interval estimation window match the expected investment time horizon. These results have a number of implications for investors, portfolio managers, and hedge fund managers. This has been implemented in the Returnfinder App, which produces Total Return charts that include dividends. Additionally, the study provides market betas for the 38 most active ETFs in the U.S. equity markets over different estimation intervals and return frequencies.

Keywords: ETF beta estimates estimation intervalling effect intervaling window length capm beta estimation senstitivity

Suggested Citation

Agrrawal, Pankaj and Clark, John Michael, ETF Betas: A Study of their Estimation Sensitivity to Varying Time Intervals (2007). “ETF Betas: A Study of their Estimation Sensitivity to Varying Time Intervals”, Pankaj Agrrawal and John M. Clark, Institutional Investor Journals, ETF and Indexing, Vol. 41 (10), pp. 96-103, Fall 2007., Available at SSRN: https://ssrn.com/abstract=2639017

Pankaj Agrrawal (Contact Author)

University of Maine ( email )

Orono, ME 04469
United States

John Michael Clark

University of Southern Mississippi - College of Business Administration - Economics, Finance, & International Business ( email )

USM Box 5072
Hattiesburg, MS 39406
United States
601-266-5766 (Phone)
601-266-4920 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
444
PlumX Metrics