Estimating Betas in Practice: Alternatives That Matter and Those That Do Not
6 Pages Posted: 19 Jan 2019
Date Written: January 9, 2019
In this PERSPECTIVE, I demonstrate that Betas are nearly identical whether or not the returns are adjusted for dividends and whether raw returns are used instead of excess returns. By far, the choice of using weekly or monthly returns or estimating two- or five-year Betas are more impactful than is the accounting for dividends or the risk-free rate. That said, simpler, less data-intensive
estimates of Beta appear valid.
Keywords: Beta, Financial Analysis, Portfolio, Cost of Capital, Cost of Equity
JEL Classification: G11, C10, C80
Suggested Citation: Suggested Citation