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The Stability and Predictability of Betas: Evidence from the Kuala Lumpur Stock Exchange

Beta measures the systematic or undiversifiable risk of a security. Investors desire stable (and hence predictable) measures of beta to enable them to accurately estimate the expected returns on their investment. Instable betas lead to inaccurate estimates of expected returns over time and hence p...

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Main Authors: Mohamad, Shamsher, Md. Nassir, Annuar
Format: Article
Language:English
English
Published: Universiti Putra Malaysia Press 1994
Online Access:http://psasir.upm.edu.my/id/eprint/3044/1/The_Stability_and_Predictability_of_Betas_Evidence_from.pdf
http://psasir.upm.edu.my/id/eprint/3044/
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spelling my.upm.eprints.30442013-05-27T07:05:20Z http://psasir.upm.edu.my/id/eprint/3044/ The Stability and Predictability of Betas: Evidence from the Kuala Lumpur Stock Exchange Mohamad, Shamsher Md. Nassir, Annuar Beta measures the systematic or undiversifiable risk of a security. Investors desire stable (and hence predictable) measures of beta to enable them to accurately estimate the expected returns on their investment. Instable betas lead to inaccurate estimates of expected returns over time and hence provide misleading signals on performance of investments. This study examines the stability and predictability of the three leads/lags version of FowlerRorke betas (unlike OLS betas, these betas address the problem of thinness of trading peculiar to the KLSE) of 148 firms listed on the Kuala Lumpur Stock Exchange (KLSE). The findings suggest that the beta of both individual securities and portfolios are quite stationary over time. As expected the portfolio betas are relatively more stable than individual securities betas. Furthermore, the method of portfolio formation affects the relative portfolio beta stability. However, portfolio beta stability is achieved with 15 or more securities, irrespective of method of portfolio formation. Overall, the findings indicate that investors can reliably utilize estimated individual security and portfolio betas for their portfolio selection and investment decisions. Universiti Putra Malaysia Press 1994 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/3044/1/The_Stability_and_Predictability_of_Betas_Evidence_from.pdf Mohamad, Shamsher and Md. Nassir, Annuar (1994) The Stability and Predictability of Betas: Evidence from the Kuala Lumpur Stock Exchange. Pertanika Journal of Social Sciences & Humanities, 2 (1). pp. 43-52. ISSN 0128-7702 English
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
English
description Beta measures the systematic or undiversifiable risk of a security. Investors desire stable (and hence predictable) measures of beta to enable them to accurately estimate the expected returns on their investment. Instable betas lead to inaccurate estimates of expected returns over time and hence provide misleading signals on performance of investments. This study examines the stability and predictability of the three leads/lags version of FowlerRorke betas (unlike OLS betas, these betas address the problem of thinness of trading peculiar to the KLSE) of 148 firms listed on the Kuala Lumpur Stock Exchange (KLSE). The findings suggest that the beta of both individual securities and portfolios are quite stationary over time. As expected the portfolio betas are relatively more stable than individual securities betas. Furthermore, the method of portfolio formation affects the relative portfolio beta stability. However, portfolio beta stability is achieved with 15 or more securities, irrespective of method of portfolio formation. Overall, the findings indicate that investors can reliably utilize estimated individual security and portfolio betas for their portfolio selection and investment decisions.
format Article
author Mohamad, Shamsher
Md. Nassir, Annuar
spellingShingle Mohamad, Shamsher
Md. Nassir, Annuar
The Stability and Predictability of Betas: Evidence from the Kuala Lumpur Stock Exchange
author_facet Mohamad, Shamsher
Md. Nassir, Annuar
author_sort Mohamad, Shamsher
title The Stability and Predictability of Betas: Evidence from the Kuala Lumpur Stock Exchange
title_short The Stability and Predictability of Betas: Evidence from the Kuala Lumpur Stock Exchange
title_full The Stability and Predictability of Betas: Evidence from the Kuala Lumpur Stock Exchange
title_fullStr The Stability and Predictability of Betas: Evidence from the Kuala Lumpur Stock Exchange
title_full_unstemmed The Stability and Predictability of Betas: Evidence from the Kuala Lumpur Stock Exchange
title_sort stability and predictability of betas: evidence from the kuala lumpur stock exchange
publisher Universiti Putra Malaysia Press
publishDate 1994
url http://psasir.upm.edu.my/id/eprint/3044/1/The_Stability_and_Predictability_of_Betas_Evidence_from.pdf
http://psasir.upm.edu.my/id/eprint/3044/
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score 13.211869

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