Timeline for How reliable is beta as a measure of risk when investing lwith a long horizon
Current License: CC BY-SA 3.0
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| Dec 24, 2022 at 4:41 | comment | added | user121416 | @MatthewGunn Very interesting. How do we reach the conclusion that they are correlated? (not doubting that they are, i'm interested because you have ten thousand cross sectional stocks and no obvious ordering, so what statistical test would tell that they're correlated?) | |
| Dec 21, 2022 at 18:53 | comment | added | Matthew Gunn | @user121416 That's the right idea, but the word "independent" is too strong: return residuals are almost always cross-sectionally correlated no matter what the model/specification is. This flows through and your errors in estimating beta won't be independent. Averaging (i.e. forming portfolios) is still a helpful technique for some statistical issues! It can still help. It's a pretty low-tech but simple, understandable, and robust way to get more stable estimates. | |
| Dec 14, 2022 at 0:33 | comment | added | user121416 | Are portfolio betas more reliable because that beta is an average of betas whose statistical noises are independent and get hopefully cancelled out with respect to "n", number of stocks? | |
| Oct 7, 2016 at 10:04 | vote | accept | Matthias | ||
| Oct 7, 2016 at 10:03 | comment | added | Matthias | Thanks, I like your answer. When seeing stocks as actual companies, I think looking at firm characteristics makes the most sense to me. Alhough there is always a level of exposure to the market/economy ehich shold sone how be factored in. Do you know of any papers that look at firm characteristics rather than beta? | |
| Oct 7, 2016 at 6:30 | history | edited | Matthew Gunn | CC BY-SA 3.0 |
added 526 characters in body
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| Oct 7, 2016 at 6:29 | review | First posts | |||
| Oct 8, 2016 at 20:12 | |||||
| Oct 7, 2016 at 6:24 | history | answered | Matthew Gunn | CC BY-SA 3.0 |