Mean-Absolute-Deviation versus Least-Squares Regression Estimation of Beta Coefficients

Bradford Cornell and J. Kimball Dietrich

Journal of Financial and Quantitative Analysis, 1978, vol. 13, issue 1, 123-131

Abstract: Much of the applied work in finance, for instance the literature on capital budgeting, assumes that a firm's management has an accurate estimate of the firm's beta. This estimate is presumably derived by running a regression of the form:where:Ri = rate of return on equity for firm i,Rf = the risk-free rate, andu = a white noise random variable.

Date: 1978
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