Hostname: page-component-cd9895bd7-7cvxr Total loading time: 0 Render date: 2024-12-25T08:19:06.340Z Has data issue: false hasContentIssue false
  • English
  • Français

Statistical Analysis of Risk Surrogates for Nyse Stocks

Published online by Cambridge University Press:  06 April 2009

Jack Clark Francis
Get access Rights & Permissions [Opens in a new window]

Extract

Since the beta systematic risk coefficient and the standard deviation are both important statistics in the received capital market theory [22] and the received option theory [1], considerabe effort has been expended on obtaining empirical estimates of these statistics [30]. The ordinary least squares (OLS) technique is typically utilized to estimate beta as the regression coefficient of a simple linear regression. However, the OLS betas for common stocks were found to be disconcertingly unstable over time [5, 6, 13, 15, 25]. But, whether the OLS beta or an adjusted beta were used, the regression statistics could still only explain less than half of the variability of most New York Stock Exchange (NYSE) stocks' returns (more specifically, R2 < .5).

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 14 , Issue 5 , December 1979 , pp. 981 - 997
Copyright
Copyright © School of Business Administration, University of Washington 1979

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Black, F., and Scholes, M.. “The Pricing Of Options And Corporate Liabilities.” Journal Of Political Economy, Vol. 81, No. 3 (05/06 1973).CrossRefGoogle Scholar
[2]Blume, M. E. “On The Assessment of Risk.” Journal of Finance (03 1971), p. 1–10.CrossRefGoogle Scholar
[3]Blume, M. E. “Betas And Their Regression Tendencies.” Journal of Finance, Vol. 30, No. 3 (06 1975), p. 785–795.CrossRefGoogle Scholar
[4]Elton, E. J., and Gruber, M. J.. “Estimating The Dependence Structure of Share Prices—Implications For Portfolio Selection.” Journal of Finance Vol. 28, No. 5 (12 1973), p. 1203–1232.Google Scholar
[5]Fabozzi, F. J., and Francis, J. C.. “Beta As A Random Coefficient.” Journal of Financial and Quantitative Analysis (03 1978).Google Scholar
[6]Fabozzi, F. J., and Francis, J. C.. “The Effect of Changing Macroeconomic Conditions on Alphas, Betas, And The Single-Index Market Model.” Journal of Financial And Quantitative Analysis (06 1979).Google Scholar
[7]Fama, E. F.Foundations of Finance. New York: Basic Books (1976).Google Scholar
[8]Francis, J. C. “Analysis of Equity Returns: A Survey With Extensions.” Journal of Economics and Business, Vol. 29, No. 3 (Spring/Summer 1973), p. 181–192.Google Scholar
[9]Francis, J. C. “Intertemporal Differences In Systematic Stock Price Movements.” Journal of Financial and Quantitative Analysis (06 1975).CrossRefGoogle Scholar
[10]Jensen, M. C. “The Performance of Mutual Funds In The Period 1945–64.” Journal of Finance (05 1968), p. 389–416.CrossRefGoogle Scholar
[11]Johnston, J.Econometric Methods, 2nd ed.New York: McGraw-Hill Book Co. (1972).Google Scholar
[12]Klemkosky, R. C, and Martin, J. D.. “The Adjustement of Beta Forecasts.” Journal of Finance (09 1975).CrossRefGoogle Scholar
[13]Kon, S. J., and Jen, Frank C.. “The Investment Performance of Mutual Funds: An Empirical Investigation of Timing, Selectivity, and Market Efficiency.” Journal of Finance (05 1978).Google Scholar
[14]Latane, H. A., and Rendelman, R. J. Jr “Standard Deviations of Stock Price Ratios Implied In Option Prices.” Journal of Finance (05 1976), p. 369–381.CrossRefGoogle Scholar
[15]Levy, R. A. “On The Short-Term Siationarity of Beta Coefficients.” Financial Analysts Journal, Vol. 27 (11–12 1971).CrossRefGoogle Scholar
[16]Officer, R. R. “The Variability of The Market Factor Of The New York Stock Exchange.” Journal of Business, Vol. 46 (06 1973), p. 440–450.Google Scholar
[17]Roll, Richard “A Critique of The Asset Pricing Theory's Tests; Part I: On Past and Potential Testability of The Theory.” Journal of Financial Economics, Vol. 4, No. 2 (03 1977), p. 129–176.CrossRefGoogle Scholar
[18]Rosenberg, B. “A Survey of Stochastic Regression Parameters.” Annals of Economic and Social Measurement, Vol. 2, No. 4, p. 381–397.Google Scholar
[19]Rosenberg, B., and Guy, J.. “Beta and Investment Fundamentals.” Financial Analysts Journal (05–06 1976).Google Scholar
[20]Rosenberg, B., and Marathe, V.. “Common Factors in Security Returns: Microeconomic Determinants and Microeconomic Correlates.” Working Paper No. 44, Research Program in Finance at University of California at Berkeley (05 1976).Google Scholar
[21]Sharpe, W. F. “A Simplified Model For Portfolio Analysis.” Management Science (01 1963), p. 277–293.CrossRefGoogle Scholar
[22]Sharpe, W. F. “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk.” Journal of Finance (09 1964).Google Scholar
[23]Sharpe, W. F. “Mutual Fund Performance.” Journal of Business, Supplement, No. 1, Part 2 (01 1966), p. 119–138.CrossRefGoogle Scholar
[24]Sharpe, W. F. “Mean-Absolute-Deviation Characteristic Lines For Securities and Portfolios.” Management Science, Vol. 18, No. 2 (10 1971), p. B–1 to B–13.CrossRefGoogle Scholar
[25]Sharpe, W. F., and Cooper, G. M.. “Risk-Return Classes of NYSE Common Stocks, 1931–67.” Financial Analysts Journal, Vol. 28, No. 2 (03–04 1972).Google Scholar
[26]Thompson, Donald J. “Sources of Systematic Risk In Common Stocks.” Journal of Business, Vol. 49, No. 2 (04 1976), p. 173–188.Google Scholar
[28]Treynor, Jack L. “How To Rate The Management of Investment Funds.” Harvard Business Review (01–02 1965), p. 63–70.Google Scholar
[29]Vasicek, Oldrich A. “A Note On Using Cross-sectional Information in Bayesian Estimation of Security Betas.” Journal of Finance, Vol. 28, No. 5 (12 1973), p. 1233–1239.Google Scholar
[30]Welles, C. “The Beta Revolution: Learning To Live With Risk.” Institutional Investor (1971).Google Scholar