Measuring Systematic Risk Using Implicit Beta

Andrew F. Siegel
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Andrew F. Siegel: Departments of Management Science, Finance, and Statistics, University of Washington, Seattle, Washington 98195

Management Science, 1995, vol. 41, issue 1, 124-128

Abstract: A new technology is proposed for estimating the systematic (beta) risk of a firm's stock. Just as the implicit volatility of an asset is revealed by an ordinary call option, the "implicit beta" of a stock would be revealed by the price of an option to exchange shares of stock for shares of a market index. Considerable benefits would accrue to those involved with the theory and practice of finance, if and when these exchange options begin trading, due to the availability of instantaneous, up-to-the-minute, precise indicators of firms' systematic risk levels.

Keywords: exchange option; volatility and return in financial markets; capital asset pricing model (search for similar items in EconPapers)
Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:41:y:1995:i:1:p:124-128

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