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Int. J. Financial Stud. 2016, 4(4), 25; doi:10.3390/ijfs4040025

Sectoral Differences in the Choice of the Time Horizon during Estimation of the Unconditional Stock Beta

1
Department of Economics, University of Ioannina, Panepistimioupoli, 45510 Ioannina, Greece
2
Department of Balcan, Slavic and Oriental Studies, University of Macedonia, 156, Egnatia Street, P.O. Box 1591, 54006 Thessaloniki, Greece
3
The University of Sheffield International Faculty, City College, 3 Leontos Sofou Street, 54626 Thessaloniki, Greece
4
Department of Economics, University of Macedonia, 156, Egnatia street, P.O. Box 1591, 54006 Thessaloniki, Greece
*
Author to whom correspondence should be addressed.
Academic Editor: Nicholas Apergis
Received: 8 July 2016 / Revised: 28 November 2016 / Accepted: 2 December 2016 / Published: 17 December 2016
View Full-Text   |   Download PDF [247 KB, uploaded 17 December 2016]

Abstract

The stock beta coefficient literature extensively discusses the proper methods for the estimation of beta as well as its use in asset valuation. However, there are fewer references with respect to the appropriate time horizon that investors should utilize when evaluating the risk-return relationship of a stock. We examine the appropriate time horizon for beta estimation, differentiating our results by sector according to the Industry Classification Benchmark. We employ data from the NYSE and estimate varying lengths of beta employing data from 30 to 250 trading days. The constructed beta series is then examined for the presence of breaks using the endogenous structural break literature. Results show evidence against the use of betas that employ more than 90 trading days of data provisional to the sector under study. View Full-Text
Keywords: stock beta; endogenous structural breaks; time horizon stock beta; endogenous structural breaks; time horizon
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Dadakas, D.; Karpetis, C.; Fassas, A.; Varelas, E. Sectoral Differences in the Choice of the Time Horizon during Estimation of the Unconditional Stock Beta. Int. J. Financial Stud. 2016, 4, 25.

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Int. J. Financial Stud. EISSN 2227-7072 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
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