Sensitivity of Systematic Risk Estimates to the Return Measurement Interval under Serial Correlation

Dongcheol Kim

Review of Quantitative Finance and Accounting, 1999, vol. 12, issue 1, 49-64

Abstract: This paper analytically and empirically investigates the sensitivity of the return measurement interval to the market beta estimate and suggests a market beta estimation method incorporating the investment horizon through a vector autoregressive (VAR) model when there is serial correlation in returns. The analytical relation between the beta estimate and the return measurement interval is obtained. Based on the analytical relation, a decision function for the intervalling effect is provided. It is found that the intervalling effect is mostly caused by January returns. Copyright 1999 by Kluwer Academic Publishers

Date: 1999
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