Speaker:Jun Xu, State University of New York at Buffalo

Date:Tuesday, March 20, 2012.

Time:19:00 pm - 20:00 pm

Venue:Room 501, Run Run Shaw Science Building, Central Campus

Sponsor:The Center of Economic Research Shandong University

Abstract:

The first part of the paper examines a new method of estimating systematic risk, or “beta”. Due to market imperfection, stock prices, especially those of small firms, do not move with the market synchronously, or fully respond to the market in a single period. As a result the contemporary beta estimated from the market model is underestimated for small firms and overestimated for large firms. Betas estimated from the market model also vary greatly across different estimation horizons. I develop a model of delay/lead price reactions for small/large firms. Based on this model I derive a multiple-period regression equation. I then estimate the beta based on the equation for each of the ten size-ranked-decile portfolios at different estimation horizons, using monthly, weekly and daily returns. Betas estimated from optimal estimation horizons are discussed. The results show that, betas estimated at similar horizons, using monthly, weekly, and daily returns, are consistent with each other. Betas estimated for the ten size-decile portfolios from monthly, weekly, and daily average returns are positively related to those returns, respectively.

For further information, please visit:http://www.cer.sdu.edu.cn/articleshow.php?id=2184