Market-Based, Accounting-Based, and Composite-Based Beta Forecasting

Cheng Few Lee

Chapter 88 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 2859-2899 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter uses the concepts of basic portfolio analysis and the dominance principle to derive the CAPM. A graphical approach is first utilized to derive the CAPM, after which a mathematical approach to the derivation is developed that illustrates how the market model can be used to decompose total risk into two components. This is followed by a discussion of the importance of beta in security analysis and further exploration of the determination and the forecasting of beta. The discussion closes with the applications and implications of the CAPM, and the appendix offers empirical evidence of the risk–return relationship.In this chapter, we define both market beta and accounting beta and how they are determined by different accounting and economic information. Then, we forecast both market beta and accounting beta. Finally, we propose a composite method to forecast beta.

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
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789811269943_0088 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789811269943_0088 (text/html)
Ebook Access is available upon purchase.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wschap:9789811269943_0088

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().