Forecasting beta: How well does the 'five-year rule of thumb' do?

Journal of Business Finance and Accounting

Volumn 27, Issue 7-8, 2000, Pages 953-982

  Groenewold, Nicolaas ^a   Fraser, Patricia ^b  

^a UNIVERSITY OF WESTERN AUSTRALIA   (Australia)

^b UNIVERSITY OF ABERDEEN   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 34250000675     PISSN: 0306686X     EISSN: 14685957     Source Type: Journal    
DOI: 10.1111/1468-5957.00341     Document Type: Article

References (44)

1. Alexander, G. J. and N. L. Chervany (1980), 'On the Estimation and Stability of Beta', Journal of Financial and Quantitative Analysis, Vol. 15, No. 1 (March), pp. 123-37.
2. Altman, E, B. Jacquillat and M Levasseur (1974), 'Comparative Analysis of Risk Measures: France and the United States', Journal of Finance, Vol. 29, No. 5 (December), pp. 1495-511.
3. Ariff, M. and L. W. Johnson (1990), 'Ex Rate Risk Premia on Macroeconomic Factors in the Pricing of Stocks: An Analysis Using Arbitrage Pricing Theory', Chapter 18 in M. Ariff and L. W. Johnson, Securities Markets and Stock Pricing (Longmans, Singapore), pp. 192-204.
4. Ashley, R., C. W. J. Granger and R. Schmalensee (1980), 'Advertising and Aggregate Consumption: An Analysis of Causation', Econometrica, Vol. 48, No. 5, (July), pp. 1149-67.
5. Baesel, J. B. (1974), 'On the Assessment of Risk: Some Further Considerations', Journal of Finance, Vol. 29, No. 5 (December), pp. 1491-94.
6. Beaver, W., P. Kettler and M. Scholes (1970), 'The Association Between Market Determined and Accounting Determined Risk Measures', The Accounting Review, Vol. 45, No. 2 (October), pp. 654-82.
7. Black, A., P. Fraser and D. Power (1992), 'UK Unit Trust Performance, 1980-1989: A Passive Time-Varying Approach', Journal of Banking and Finance, Vol. 16, No. 5 (September), pp. 1015-33.
8. Blume, M.E. (1971), 'On the Assessment of Risk', Journal of Finance, Vol. 26, No. 1 (March), pp. 1-10.
9. - (1975), 'Betas and Their Regression Tendencies', Journal of Finance, Vol. 30, No. 3 (June), pp. 785-95.
10. Bos, T. and P. Newbold (1984), 'An Empirical Investigation of the Possibility of Stochastic Systematic Risk in the Market Model', Journal of Business, Vol. 57, No. 1 (January), pp. 34-41.
11. Brooks, R. D. and R. W. Faff (1997), 'A Note on Beta Forecasting', Applied Economics Letters, Vol. 4, No. 2 (February), pp. 77-78.
12. Brooks, R. D., R. W. Faff and T. Josev (1997), 'Beta Stability and Monthly Seasonal Effects: Evidence From the Australian Capital Market', Applied Economics Letters, Vol. 4, No. 9 (September), pp. 563-66.
13. - and J. Lee (1992), 'The Form of Time Variation of Systematic Risk: Some Australian Evidence', Applied Financial Economics, Vol. 2, No. 4 (December), pp. 191-98.
14. -(1994), 'Beta Stability and Portfolio Formation', Pacific-Basin Finance Journal, Vol. 4, No. 4 (December), pp. 463-80.
15. - and M. D. McKenzie (1998), 'Time-Varying Beta Risk of Australian Industry Portfolios: A Comparison of Modelling Techniques', Australian Journal of Management, Vol. 23, No. 1 (June), pp. 1-22.
16. Chang, W. C. and D. E. Weiss (1991), 'An Examination of the Time Series Properties of Beta in the Market Model', Journal of the American Statistical Association, Vol. 86, No. 416 (December), pp. 883-90.
17. Chen, S. N. and C. F. Lee (1982), 'Bayesian and Mixed Estimators of Time Varying Betas', Journal of Economics and Business, Vol. 34, No. 4, pp. 291-301.
18. Chen, N., R. Roll and S. A. Ross (1986), 'Economic Forces and the Stock Market', Journal of Business, Vol. 59, No. 3 (July), pp. 383-403.
19. Clare, A. D. and S. N. Thomas (1994), 'Macroeconomic Factors, the APT and the UK Stock Market', Journal of Business Finance & Accounting, Vol. 21, No. 3 (April), pp. 309-30.
20. Collins, D. W., J. Ledolter and J. Rayburn (1987), 'Some Further Evidence on the Stochastic Properties of Systematic Risk', Journal of Business, Vol. 60, No. 3, (July), pp. 425-48.
21. Cooley, T. F. and E. C. Prescott (1976), 'Estimation in the Presence of Stochastic Parameter Variation', Econometrica, Vol. 44, No. 1 (January), pp. 167-84.
22. Dotan, A. and A. Ofer (1984), 'Variable Versus Stationary Beta in the Market Model: A Comparative Analysis', Journal of Banking and Finance, Vol. 8, No. 4 (December), pp. 525-34.
23. Fabozzi, F. J. and J. C. Francis (1978), 'Beta as a Random Coefficient', Journal of Financial and Quantitative Analysis, Vol. 13, No. 1 (March), pp. 101-16.
24. Faff, R. and R. Brooks (1997), 'Further Evidence on the Relationship between Beta Stability and the Length of the Estimation Period', Advances in Investment Analysis and Portfolio Management, Vol. 4, pp. 96-111.
25. - (1998), 'Time-Varying Beta Risk for Australian Industry Portfolios; An Exploratory Analysis', Journal of Business Finance & Accounting, Vol. 25, Nos. 5/6 (June/July), pp. 721-45.
26. -, J. Lee and T. Fry (1992), 'Time Stationarity of Systematic Risk: Some Australian Evidence', Journal of Business Finance & Accounting, Vol. 19. No. 2 (January), pp. 253-70.
27. Fisher, L. and J. H. Kamin (1985), 'Forecasting Systematic Risk: Estimates of 'Raw' Beta that Take Account of the Tendency of Beta to Change and the Heteroskedasticity of Residual Returns', Journal of Financial and Quantitative Analysis, Vol. 20, No. 2 (June), pp. 127-49.
28. Gonedes. N. J. (1973), 'Evidence on the Information Content of Accounting Numbers: Accounting-based and Market-based Estimates of Systematic Risk', Journal of Financial and Quantitative Analysis, Vol. 8, No. 3 (June), pp. 407-43.
29. Gonzalez-Rivera, G. (1997), 'The Pricing of Time-Varying Beta', Empirical Economics, Vol. 22, No. 3, pp. 345-63.
30. Groenewold, N. and P. Fraser (1997), 'Share Prices and Macroeconomic Factors', Journal of Business Finance & Accounting, Vol. 24, Nos. 9/10 (October/December), pp. 1367-83.
31. - (1999), 'Time-Varying Estimates of CAPM Betas', Mathematics and Computers in Simulation, Vol. 48, Nos. 4-6 (June), pp. 531-39.
32. Hawawini, G. A., P. A. Michel and A. Corhay (1985), 'New Evidence on Beta Stationarity and Forecast for Belgian Common Stocks', Journal of Banking and Finance, Vol. 9, No. 4 (December), pp. 553-60.
33. Kim, D. (1993), 'The Extent of Non-Stationarity of Beta', Review of Quantitative Finance and Accounting, Vol. 3, No. 3 (May), pp. 241-54.
34. Klemkosky, R. C. and J. D. Martin (1975), 'The Adjustment of Beta Forecasts', Journal of Finance, Vol. 30, No. 4 (September), pp. 1123-28.
35. Levy, R. A. (1974), 'On the Short-Term Stationarity of Beta Coefficients', Financial Analysts Journal, Vol. 27, pp. 55-62.
36. Martikainen, T. (1991), 'On the Significance of the Economic Determinants of Economic Risk: Empirical Evidence with Finnish Data', Applied Financial Economics, Vol. 1, No. 2 (June), pp. 97-104.
37. McDonald, B. (1983), 'Beta Nonstationarity and the Use of the Chen and Lee Estimator: A Note', Journal of Finance, Vol. 38, No. 3 (June), pp. 1005-9.
38. Meyers, S. C. (1973), 'The Stationarity Problem in the Use of the Market Model of Security Price Behavior', Accounting Review, Vol. 48, No. 2 (April), pp. 318-22.
39. Stokie, M. (1983), 'Parameter Stationarity in the Distribution of Stock Returns', Australian Journal of Management, Vol. 8, No. 1 (June), pp. 83-90.
40. Theobald, M. (1981), 'Beta Stationarity and Estimation Period: Some Analytical Results', Journal of Financial and Quantitative Analysis, Vol. 16, No. 5 (December), pp. 747-57.
41. Vasicek, O. A. (1973), 'A Note on Using Cross-Sectional Information in Bayesian Estimation of Security Betas', Journal of Finance, Vol. 28, No. 5 (December), pp. 1233-39.
42. Wells, C. (1994), 'Variable Betas on the Stockholm Exchange', Applied Economics, Vol. 4, No. 1 (February), pp. 74-92.
43. White, H. (1980), 'A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity', Econometrica, Vol. 48, No. 4 (May), pp. 817-38.
44. Young, D. S., M. A. Berry, D. W. Harvey and J. R. Page (1991), 'Macroeconomic Forces, Systematic Risk, and Financial Variables: An Empirical Investigation', Journal of Financial and Quantitative Analysis, Vol. 26, No. 4 (December), pp. 559-64.