› › Estimation Of Beta In A Simple Functional Capital Asset Pricing Model For High Frequency Us Stock Data

Estimation of Beta in a Simple Functional Capital Asset Pricing Model for High Frequency US Stock Data

Author : Yan Zhang

Publisher :

Page : 109 pages

File Size : 41,16 MB

Release : 2011

Category :

ISBN :

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Book Description

This project applies the methods of functional data analysis (FDA) to intra-daily returns of US corporations. It focuses on an extension of the Capital Asset Pricing Model (CAPM) to such returns. The CAPM is essentially a linear regression with the slope coefficient beta. Returns of an asset are regressed on index return. We compare the estimates of beta obtained for the daily and intra-daily returns. The variability of these estimates is assessed by two bootstrap methods. All computations are performed using statistical software R. Customized functions are developed to process the raw data, estimate the parameters and assess their variability. The results turn out to be: First, the estimates of beta obtained for the intradaily returns have bigger absolute values than those for the daily returns; secondly, to assess the variability of the estimates of beta obtained for the intra-daily returns, residual bootstrap method is more reliable than pairwise bootstrap method; thirdly, the estimates of beta obtained for the intra-daily returns are much higher in absolute values in 2004 than those in any other years.



A New Model of Capital Asset Prices

Author : James W. Kolari

Publisher : Springer Nature

Page : 326 pages

File Size : 35,67 MB

Release : 2021-03-01

Category : Business & Economics

ISBN : 3030651975

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Book Description

This book proposes a new capital asset pricing model dubbed the ZCAPM that outperforms other popular models in empirical tests using US stock returns. The ZCAPM is derived from Fischer Black’s well-known zero-beta CAPM, itself a more general form of the famous capital asset pricing model (CAPM) by 1990 Nobel Laureate William Sharpe and others. It is widely accepted that the CAPM has failed in its theoretical relation between market beta risk and average stock returns, as numerous studies have shown that it does not work in the real world with empirical stock return data. The upshot of the CAPM’s failure is that many new factors have been proposed by researchers. However, the number of factors proposed by authors has steadily increased into the hundreds over the past three decades. This new ZCAPM is a path-breaking asset pricing model that is shown to outperform popular models currently in practice in finance across different test assets and time periods. Since asset pricing is central to the field of finance, it can be broadly employed across many areas, including investment analysis, cost of equity analyses, valuation, corporate decision making, pension portfolio management, etc. The ZCAPM represents a revolution in finance that proves the CAPM as conceived by Sharpe and others is alive and well in a new form, and will certainly be of interest to academics, researchers, students, and professionals of finance, investing, and economics.



An Empirical and Theoretical Analysis of Capital Asset Pricing Model

Author : Mohammad Sharifzadeh

Publisher : Universal-Publishers

Page : 180 pages

File Size : 14,87 MB

Release : 2010-11-18

Category :

ISBN : 1599423758

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Book Description

The problem addressed in this dissertation research was the inability of the single-factor capital asset pricing model (CAPM) to identify relevant risk factors that investors consider in forming their return expectations for investing in individual stocks. Identifying the appropriate risk factors is important for investment decision making and is pertinent to the formation of stocks' prices in the stock market. Therefore, the purpose of this study was to examine theoretical and empirical validity of the CAPM and to develop and test a multifactor model to address and resolve the empirical shortcomings of the single-factor CAPM. To verify the empirical validity of the standard CAPM and of the multifactor model, five hypotheses were developed and tested against historical monthly data for U.S. public companies. Testing the CAPM hypothesis revealed that the explanatory power of the overall stock market rate of return in explaining individual stock's expected rates of return is very weak, suggesting the existence of other risk factors. Testing of the other hypotheses verified that the implied volatility of the overall market as a systematic risk factor and the companies' size and financial leverage as nonsystematic risk factors are important in determining stock's expected returns and investors should consider these factors in their investment decisions. The findings of this research have important implications for social change. The outcome of this study can change the way individual and institutional investors as well as corporations make investment decisions and thus change the equilibrium prices in the stock market. These changes in turn could lead to significant changes in the resource allocation in the economy, in the economy's production capacity and production composition, and in the employment structure of the society.



The Influence of Sample Size on the Dynamics of Beta Factors

Author : Kevin Rink

Publisher : GRIN Verlag

Page : 27 pages

File Size : 49,67 MB

Release : 2010-04-14

Category : Business & Economics

ISBN : 3640591712

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Book Description

Seminar paper from the year 2008 in the subject Business economics - Business Management, Corporate Governance, grade: 1,2, European Business School - International University Schloß Reichartshausen Oestrich-Winkel, language: English, abstract: The capital asset pricing model (CAPM) was introduced by William Sharpe, John Lintner, and Jan Mossin in the 1960s on the basis of Harry Markowitz’s achievements in the field of portfolio theory. Since then, the CAPM has been one of the most widely used models for evaluating the price of portfolio assets. A major element of the CAPM is the beta factor. The beta factor measures how the expected return of a stock or a portfolio correlates with the return of the whole market. (...) Obviously, the fluctuation of a stock does affect beta factors. As the value of beta is decisive for the portfolio selection process, it is necessary to provide the CAPM with a beta that represents the best possible estimate of correlation with the market. On account of this, the calculation of beta factors is complex as betas will vary over time. In addition, sample size variation can cause change within the beta. (...) The aim of this seminar paper is to show the influence of the sample size on the beta factor. Furthermore, it shall attempt to define the determinants of an ideal sample size.



Two Essays on Asset Pricing

Author : Jun Xu

Publisher :

Page : 90 pages

File Size : 11,30 MB

Release : 2011

Category :

ISBN :

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Book Description

Essay One: A New Estimate of BetaThis essay examines a new method of estimating systematic risk, or "beta". Due to market imperfection, stock prices, especially those of small firms, do not move with the market index synchronously. Because of nonsynchronous or delayed reaction in price for small firms, the traditional beta estimated from the market model may not be a true reflection of systematic risk. In other words, since stock prices do not fully respond to the market in a single period, the contemporary beta may only reflect the partial systematic risk. As a result, the beta estimated from the market model is underestimated for small firms and overestimated for large firms. The same problem also causes betas estimated from the market model to vary greatly across different estimation horizons. I develop a model of delay/lead price reactions for small/large firms. Based on this model I derive a multiple-period regression equation for the new estimation of beta.^We then estimate the equation for each of the ten size-ranked decile portfolios at different estimation horizons, using monthly, weekly and daily returns. Betas estimated from the optimal estimation horizons for monthly, weekly, and daily returns are discussed. Our results show that, betas estimated at similar horizons, using monthly, weekly, and daily returns, are consistent with each other. Betas estimated for the ten size-decile portfolios from monthly, weekly, and daily average returns are positively related to those returns, respectively. Essay Two: Test of Capital Asset Pricing Model Based on a New Estimate of BetaThis essay tests the Capital Asset Pricing Model (CAPM), based on a new estimate of beta. The test methodology follows the classic Fama-MacBeth (1973) approach, using updated data from 1926-2010.^I ran each test on eleven different periods based on three different estimates of beta: the Ordinary Least Square (OLS) beta, the Scholes-Williams (1977) beta, and a new estimate of beta. From three long testing periods, 1935-1968, 1969-2010, and 1935-2010, all three hypotheses are confirmed based on the new estimate of beta. In other words there is a positive trade-off between average return and risk, and non-linearity and non-beta risk do not play a significant role in explaining the cross section of expected return. Test results from the three long periods based on the OLS beta and the Scholes-Williams beta are mixed and less supportive to CAPM. Our test results from the eight shorter periods do not confirm the CAPM. However, this may be due to the lack of power and efficiency of the test methodology when applied to short periods.^Overall, our results from long periods show that tests based on the new estimate of beta perform better than those based on the OLS beta and the Scholes-Williams beta in terms of supporting CAPM.



Measurement Issues in the Capital Asset Pricing Model & Size Effect and Duration

Author : Yongho Seo

Publisher :

Page : pages

File Size : 12,17 MB

Release : 2012

Category : Finance

ISBN :

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Book Description

It has been observed that the value of an asset's beta varies with the frequency of the data used to generate the value, a phenomenon hereafter referred to as "time scale", or simply "scale". If the scale effect is strong enough, then ignoring this phenomenon calls into question studies that rely on comparing beta values. The most notable of these studies is the classification of stocks as "aggressive" or "defensive". I show that such a categorization varies substantially when comparing betas estimated using monthly data versus annual data. Contrary to other studies, betas do not vary monotonically as data scale lengthens. Betas measured on a trailing forty eight month return series with a quarterly time scale explained expected stock returns better than other month data lengths and frequencies. Between 1926 and 2009, beta was able to explain expected returns in 79.1% of rolling estimation periods. Firm size is another important scaling factor that can impact beta measurement. I therefore study stock growth rates based on the size of the underlying firm. I show that cumulative growth factors extracted from firm size are related to Macaulay duration. Smaller firms have a higher duration, and this is shown to explain the small firm effect. Duration relates to reinvestment risk. Using a firm's duration, investors are able to generate home-made dividends when they rebalance their portfolios.





An Empirical Test of the "Capital Asset Pricing Modell" (CAPM) on Current Stock Data

Author : Lucas Ammelung

Publisher :

Page : 62 pages

File Size : 25,29 MB

Release : 2020-12-30

Category :

ISBN : 9783346338099

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Bachelor Thesis from the year 2020 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, Munich University of Applied Sciences, language: English, abstract: The goal of this study is thus to determine the best available asset pricing model in Germany and whether the use of pre-existing datasets, with the factors already calculated, brings results as accurate as a custom dataset. This is relevant in Germany as the CAPM is still the most commonly used way to compute the cost of equity with 34% of companies using it. Another 16% of companies are using asset pricing models with additional risk factors. To determine the answer to this, this study will look into the aforementioned three most commonly used models: the CAPM, the Fama and French three-factor model and the Carhart four-factor model. After explaining the background and functioning of the CAPM, this study will show the flaws within the model and how these flaws led to extensions of the CAPM. Each model will then be statistically analyzed with three distinct sets of data. Two of these are publicly available, while the last has been calculated for this study. Lastly, to understand how the difference in data used can influence the results from asset pricing models, the runtime and underlying factor of datasets will be modified, re-analyzed and compared to the initial results.



The Conditional Capital Asset Pricing Model Revisited

Author : Fabian Hollstein

Publisher :

Page : 52 pages

File Size : 13,23 MB

Release : 2019

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ISBN :

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Book Description

When using high-frequency data, the conditional CAPM can explain asset-pricing anomalies. Using conditional betas based on daily data, the model works reasonably well for a recent sample period. However, it fails to explain the size anomaly as well as 3 out of 6 of the anomaly component excess returns. Using high-frequency betas, the conditional CAPM is able to explain the size, value, and momentum anomalies. We further show that high-frequency betas provide more accurate predictions of future betas than those based on daily data. This result holds for both the time-series and the cross-sectional dimensions.



Empirical Asset Pricing

Author : Wayne Ferson

Publisher : MIT Press

Page : 497 pages

File Size : 50,51 MB

Release : 2019-03-12

Category : Business & Economics

ISBN : 0262039370

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Book Description

An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.