Alternative beta risk estimators in cases of extreme thin trading: Canadian evidence

• Autores: R. Brooks, Robert Faff, T.R.L. Fray, E. Bissoondoyal-Bheenick
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 15, Nº. 18, 2005, págs. 1251-1258
• Idioma: inglés
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• Resumen

  • In this paper, an alternative method of estimating the systematic risk for Canadian stocks is presented and empirically investigated. The method proposed is applied to a set of data impacted by censoring -the presence of zero returns, wich occurs in extreme cases of thin trading. The approach used is the sample selectivity model, which is a two-step procedure: with a selectivity component and a regression component. In addition, this study compares the new beta estimate to the standard OLS beta and the Dimson Beta. The results indicate that the selectivity-corrected beta does correct the downward bias of the OLS estimates and possesses desirable statistical properties.