Estimating Beta: The International Evidence
65 Pages Posted: 8 Mar 2020 Last revised: 28 Jul 2020
Date Written: February 13, 2020
This paper examines the estimation of global and local betas for a large set of Developed and Emerging international markets. Estimators based on daily data clearly outperform those based on monthly or quarterly data. For global and local market betas, the optimal window length is at roughly 24 and 12 months, respectively, for most Developed Markets. It tends to be somewhat longer for Emerging Markets. The best estimators include a double-shrinkage, a long memory (FI), and a simple combination approach. For hedging the market risk exposure in anomaly portfolios, the FI and combination estimators also perform overall best.
Keywords: Beta estimation, global market betas, international capital markets
JEL Classification: G15, G12, G11, G17
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