Time-Stratified Estimates of Portfolio Betas and Their Effect on the Capital Asset Pricing Model

22 Pages Posted: 19 May 2006

See all articles by William R. Kinney, Jr.

William R. Kinney, Jr.

University of Texas at Austin - Department of Accounting

Michael S. Rozeff

SUNY at Buffalo - Department of Financial & Managerial Economics

Date Written: May, 1976

Abstract

This paper shows that large efficiency gains in estimating portfolio betas can be achieved by using time-stratified estimates which explicitly incorporate seasonality in stock returns. Several types of estimates are examined: combined, separate, two strata and twelve strata. Not only do these estimates greatly reduce standard errors, but also time-stratified beta estimates raise the intercept and lower the slope in estimates of the capital market line.

Keywords: seasonality, beta estimation, capm, stratified samples

JEL Classification: G12

Suggested Citation

Kinney, William and Rozeff, Michael S., Time-Stratified Estimates of Portfolio Betas and Their Effect on the Capital Asset Pricing Model (May, 1976). Available at SSRN: https://ssrn.com/abstract=903303 or http://dx.doi.org/10.2139/ssrn.903303

William Kinney

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States
512-471-3632 (Phone)
512-471-3904 (Fax)

Michael S. Rozeff (Contact Author)

SUNY at Buffalo - Department of Financial & Managerial Economics ( email )

Buffalo, NY 14260
United States

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