Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172871
Authors: 
Hollstein, Fabian
Prokopczuk, Marcel
Wese Simen, Chardin
Year of Publication: 
2017
Series/Report no.: 
Hannover Economic Papers (HEP) No. 617
Abstract: 
Researchers and practitioners face many choices when estimating an asset's sensitivities toward risk factors, i.e., betas. We study the effect of different data sampling frequencies, forecast adjustments, and model combinations for beta estimation. Using the entire U.S. stock universe and a sample period of more than 50 years, we find that a historical estimator based on daily return data with an exponential weighting scheme as well as a shrinkage toward the industry average yield the best predictions for future beta. Adjustments for asynchronous trading, macroeconomic conditions, or regression-based combinations, on the other hand, typically yield very high prediction errors.
Subjects: 
Beta estimation
forecast combinations
forecast adjustments
JEL: 
G12
G11
G17
Document Type: 
Working Paper

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