THE EXAMINATION OF BETA ESTIMATION METHODS IN TEHRAN STOCK EXCHANGE

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ABBASINEZHAD H.; MIRSANEEI S.R.A.; MOHAMMADI SHAPOUR

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Paper Information

Journal: THE IRANIAN ACCOUNTING AND AUDITING REVIEW Year:2007 | Volume:14 | Issue:47 Page(s): 3-38

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Information Journal Paper

Title

THE EXAMINATION OF BETA ESTIMATION METHODS IN TEHRAN STOCK EXCHANGE

Author(s)

ABBASINEZHAD H. | MIRSANEEI S.R.A. | MOHAMMADI SHAPOUR | Issue Writer Certificate

Keywords

BETAQ3

GENERALIZED LEAST SQUARESQ3

GENERALIZED METHOD OF MOMENTSQ3

LEAST ABSOLUTE DEVIATIONQ3

MAXIMUM LIKELIHOODQ3

NONPARAMETRIC REGRESSIONQ2

SYSTEMATIC RISKQ2

Abstract

In the finance literature, capital assets pricing model (CAPM) relates SYSTEMATIC RISK of a financial asset to its expected return. One of the main concerns of investors and financial managers is estimation of BETA for calculation of the expected return. In general, time series data is used for the estimation of BETA. Therefore, financial managers should decide on the period of return calculation as well as the method of estimation. In this paper we used five estimation methods of BETA in Tehran Stock Exchange. The methods are GENERALIZED LEAST SQUARES (GLS), MAXIMUM LIKELIHOOD (ML), GENERALIZED METHOD OF MOMENTS (GMM), NONPARAMETRIC REGRESSION (NP) and LEAST ABSOLUTE DEVIATION (LAD). Results show that residual sum of squares (RSS) for nonparametric method is less than the others. Monthly data is helpful for estimation of the BETA. Estimated values of BETA from different methods are different. Therefore, classification of companies to high/low risk class may affected by method of estimation. However, this problem is not important in rating assets based on their risk, because of same effect of estimation bias on all of assets. In addition, we used daily and monthly data for the examination return period on value of estimated BETA. Results of daily and monthly reruns are substantially different such that some companies are high risk based on daily data and low risk based on monthly return. Also, we used Black and Sharp versions of the CAPM model. Results of these two models are not so different. All in all, BETA should be used with more caution and it is better one use more than one estimation method in practice.

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APA: Copy

ABBASINEZHAD, H., MIRSANEEI, S.R.A., & MOHAMMADI, SHAPOUR. (2007). THE EXAMINATION OF BETA ESTIMATION METHODS IN TEHRAN STOCK EXCHANGE. THE IRANIAN ACCOUNTING AND AUDITING REVIEW, 14(47), 3-38. SID. https://sid.ir/paper/8194/en

Vancouver: Copy

ABBASINEZHAD H., MIRSANEEI S.R.A., MOHAMMADI SHAPOUR. THE EXAMINATION OF BETA ESTIMATION METHODS IN TEHRAN STOCK EXCHANGE. THE IRANIAN ACCOUNTING AND AUDITING REVIEW[Internet]. 2007;14(47):3-38. Available from: https://sid.ir/paper/8194/en

IEEE: Copy

H. ABBASINEZHAD, S.R.A. MIRSANEEI, and SHAPOUR MOHAMMADI, “THE EXAMINATION OF BETA ESTIMATION METHODS IN TEHRAN STOCK EXCHANGE,” THE IRANIAN ACCOUNTING AND AUDITING REVIEW, vol. 14, no. 47, pp. 3–38, 2007, [Online]. Available: https://sid.ir/paper/8194/en

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