Predicting Betas: Two new methods

  1. Esteban González, María Victoria
  2. Tusell Palmer, Fernando Jorge
Journal:
Documentos de Trabajo BILTOKI

ISSN: 1134-8984

Year of publication: 2009

Issue: 1

Type: Working paper

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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.

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