Effects of Measurement Errors on Systematic Risk and Performance Measure of a Portfolio

Cheng Few Lee and Frank C. Jen

Chapter 62 in Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning:(In 4 Volumes), 2020, pp 2251-2263 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we first investigate how measurement errors can affect the estimators of CAPM, such as αj and βj. Then, we derive Plimb^ assuming Rm and Rb are measured with error. Finally, we develop an alternative hypothesis testing procedure for the CAPM.

Keywords: Financial Econometrics; Financial Mathematics; Financial Statistics; Financial Technology; Machine Learning; Covariance Regression; Cluster Effect; Option Bound; Dynamic Capital Budgeting; Big Data (search for similar items in EconPapers)
JEL-codes: C01 C1 G32 (search for similar items in EconPapers)
Date: 2020
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