Time Aggregation and the Estimation of the Market Model: Revision and Extension

Cheng Few Lee, Fu-Lai Lin and Phillip Cartwright

Chapter 29 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 951-978 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Data for heavily and lightly traded firms are used to evaluate the effects of temporal aggregation on beta estimates, t values, and R2estimates. In addition to our analysis of the standard market model, dynamic market and error correction models are estimated. This study evaluates differences in the short-term and long-term dynamic relationships between the market and each type of firm. It is found that temporal aggregation has important effects on both the specification of a market model and the stability of beta estimates.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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