Beta estimation in New Zealand

Ben R. Marshall, Nhut H. Nguyen and Nuttawat Visaltanachoti ()

Pacific-Basin Finance Journal, 2021, vol. 70, issue C

Abstract: Beta is an important input in the cost of capital calculations. However, it is not directly observable, so an estimate needs to be made. Beta can be easily estimated using simple regression techniques. However, there is evidence that more complex estimation procedures generate superior beta forecasts in international markets. In New Zealand, several betas out-perform OLS betas in a statistical sense. Shrinkage betas perform best, generating precision improvements of up to 17% over their OLS counterparts.

Keywords: Beta; Cost of capital (search for similar items in EconPapers)
JEL-codes: G14 G41 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:70:y:2021:i:c:s0927538x21001785

DOI: 10.1016/j.pacfin.2021.101671

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