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Flexible Least Squares Betas: The French Market Case

T. Chauveau and Bertrand Maillet

Working Papers from Caisse des Depots et Consignations - Cahiers de recherche

Abstract: A compatison between the most popular methods used to value systematic risk, using simulated series is, first, porposed. It appears that the Flexible Least Squares (FLS) methos - first proposed by Kalaba et Tesfatsion (1989) and later generalized by Lutkepohl and Herwatz (1996) - outclasses its challengers, when the actual beta is time-varying. Beta coefficients of many French stock returns are subsequently estimated, using the FLS method. The accuracy of the adjustments is higher than that of the ones using other methods (recursive or moving least squares) and the forecasting errors smaller.

Keywords: LEAST SQUARE; FRANCE; RISK (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 1998
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Handle: RePEc:fth:cadeco:1998-03/fi