Beta Estimation in New Zealand

31 Pages Posted: 15 Sep 2021 Last revised: 16 Sep 2021

See all articles by Ben R. Marshall

Ben R. Marshall

Massey University - School of Economics and Finance

Nhut H. Nguyen

Auckland University of Technology

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: July 11, 2021

Abstract

Beta is an important input in the cost of capital calculations. However, it is not directly observable, so an estimate needs to be made. Beta can be easily estimated using simple regression techniques. However, there is evidence that more complex estimation procedures generate superior beta forecasts in international markets. In New Zealand, several betas out-perform OLS betas in a statistical sense. Shrinkage betas perform best generating precision improvements of up to 17% over their OLS counterparts.

Keywords: Beta, Cost of Capital

JEL Classification: G14, G41

Suggested Citation

Marshall, Ben R. and Nguyen, Nhut H. and Visaltanachoti, Nuttawat, Beta Estimation in New Zealand (July 11, 2021). Available at SSRN: https://ssrn.com/abstract=3884583 or http://dx.doi.org/10.2139/ssrn.3884583

Ben R. Marshall (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
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Nhut H. Nguyen

Auckland University of Technology ( email )

55 Wellesley St East
Auckland, Auckland 1010
New Zealand
+64 9 921 9999 (Phone)

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
Private Bag 102904, NSMC
Auckland
New Zealand
64 9 414 0800 (43169) (Phone)
64 9 441 8177 (Fax)

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