A different approach to estimating betas of securities subject to thin trading and serial correlation

This paper enquires whether the parameters of asset pricing models can be better represented by cointegration analysis to correct the bias in β estimates. Due to the existence of correlation in lagged series, cointegration analysis, or regression in levels, would produce better estimates of asset pr...

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Bibliographic Details
Published inApplied financial economics Vol. 15; no. 16; pp. 1145 - 1152
Main Authors Wang, Peijie, Jones, Trefor
Format Journal Article
LanguageEnglish
Published London Routledge 01.11.2005
Taylor and Francis Journals
Routledge, Taylor & Francis Group
SeriesApplied Financial Economics
Subjects
Asset valuation
Cointegration
Cointegration analysis
Estimation
Financial economics
Financial instruments
Financial models
Financial research
Parameter estimation
Regression analysis
Securities trading
Stock returns
Studies
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Summary:This paper enquires whether the parameters of asset pricing models can be better represented by cointegration analysis to correct the bias in β estimates. Due to the existence of correlation in lagged series, cointegration analysis, or regression in levels, would produce better estimates of asset pricing model parameters than the regressional analysis of rates of return if the series are cointegrated. In addition, the estimation is empirically simpler.
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ISSN:0960-3107
1466-4305
DOI:10.1080/09603100500359773