Predicting Betas: Two new methods

María Victoria Esteban González and Fernando Jorge Tusell Palmer
Authors registered in the RePEc Author Service: Fernando TUSELL-PALMER

No 1134-8984, BILTOKI from Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística)

Abstract: Betas play a central role in modern finance. The estimation of betas from historical data and their extrapolation into the future is of considerable practical interest. We propose two new methods: the first is a direct generalization of the method in Blume (1975), and the second is based on Procrustes rotation in phase space. We compare their performance with various competitors and draw some conclusions.

Keywords: risk prediction; systematic risk; beta coefficients; Procustes rotation (search for similar items in EconPapers)
Date: 2009
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Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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