An examination of factors influencing airline beta values

Jung-Hua Hung and Yong-Chin Liu

Journal of Air Transport Management, 2005, vol. 11, issue 4, 291-296

Abstract: The beta value, an indicator of systematic risk, is used to estimate the costs of equity and the evaluation of a stock's reasonable price. It is useful to airlines because their capital assets and operations are relatively sensitive to systematic risks. To obtain better estimates, it is useful to identify the causes for fluctuations in beta values. This examines the volatility of airline betas in the capital asset pricing and three-factor pricing models, as well as exploring the potential factors affecting their values. The findings suggest that airline betas are volatile over time and that crashes and stock market trends may also impact them. The business cycle, operating and financial leverage, and capital structure all positively influence the sample airlines’ betas as well. The effects of return on equity on betas are negative, and liquidity might also affect betas.

Keywords: Beta value; Capital asset pricing model; Three-factor pricing model (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:11:y:2005:i:4:p:291-296

DOI: 10.1016/j.jairtraman.2005.01.004

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