Year: 1986
Type: article
Abstract: This paper looks at the currently available beta adjustment techniques and suggests a multiple root‐linear model to adjust for the regression tendency of betas. Our empirical investigate on indicates that cross‐sectional betas are not normally distributed, but their distribution tends to normal after a square‐root transformation. The evidence from the Box‐Cox regression model and the multivariate normality observed among betas after the transformation, make the functional form of our model correct. Also, we observe that the disturbance term of the multiple root‐linear model is well behaved. These findings make the ordinary least squares estimates unbiased and efficient. Finally, the mean square and extreme errors are found to be lower when our adjustment procedure is usedvis‐à‐visthe existing procedures.
Source: Journal of Applied Econometrics
Authors: Anil K. Bera, Srinivasan Kannan
Institutions: University of Illinois Urbana-Champaign, Texas A&M University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2077893934