Estimating Beta: The International Evidence

65 Pages Posted: 8 Mar 2020 Last revised: 14 Jan 2021

Date Written: February 13, 2020

Abstract

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

Suggested Citation

Hollstein, Fabian, Estimating Beta: The International Evidence (February 13, 2020). Journal of Banking and Finance (2020), Vol. 121, 105968, Available at SSRN: https://ssrn.com/abstract=3537655 or http://dx.doi.org/10.2139/ssrn.3537655

Fabian Hollstein (Contact Author)

Saarland University ( email )

Campus
Saarbrucken, Saarland D-66123
Germany

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