Contact us
 |
[email protected] |
 |
3275638434 |
 |
 |
| Paper Publishing WeChat |
Useful Links
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
Betas Used by Professors: A Survey With 2,500 Answers
Author(s)
Pablo Fernandez, Isabel Fernandez Acín
Full-Text PDF
XML 1027 Views
DOI:10.17265/1537-1514/2016.07.004
Affiliation(s)
Pablo Fernandez, professor of finance, IESE Business School, University of Navarra, Madrid, Spain.
Isabel Fernandez Acín, research assistant, IESE Business School, University of Navarra, Madrid, Spain.
ABSTRACT
This paper reports report 2,510 answers from professors from 65 countries and 934 institutions, 1,791 respondents use betas, but 107 of them do not justify the betas they use. About 97.3% of the professors justify the betas use regressions, webs, databases, textbooks, or papers, although many of them state that calculated betas “are poorly measured and have many problems”. Only 0.9% of the professors justify the beta using exclusively personal judgement (named qualitative, common sense, intuitive, and logical magnitude betas by different professors).
KEYWORDS
beta, capital asset pricing model, homogeneous and heterogeneous expectations, dispersion of calculated betas
Cite this paper
References
Achelis, S. B. (2000). Technical analysis from A to Z (2nd ed.). New York, NY: McGraw Hill.
Adsera, X., & Vinolas, P. (1997). Principios de valoracion de empresas. Editorial Deusto.
Alexander, G., Sharpe, W., & Bailey, J. (2003). Fundamentos de inversiones: Teoría y práctica (3rd ed.). Mexico: Pearson.
Altug, S., & Labadie, P. (2008). Asset pricing for dynamic economies. Cambridge University Press.
Anderson, R. C., & Fraser, D. R. (2000). Corporate control, bank risk taking, and the health of the banking industry. Journal of Banking & Finance, 24(8), 1383-1398.
Annema, M., & Goedhart, M. (2003). Better betas. McKinsey on finance (pp. 10-13). Winter.
Annema, M., & Goedhart, M. (2006). Betas: Back to normal. McKinsey on finance 20 (pp. 14-16). Summer.
Apap, A. (2006). Portfolio planning for individual investors. Bosworth-Bradley Publishing.
Baesel, J. B. (1974). On the assessment of risk: Some further considerations. Journal of Finance, 24(5), 1491-1494.
Beaver, W., Kettler, P., & Scholes, M. (1970). The association between market determined and accounting determined risk measures. The Accounting Review, 45, 654-682.
Bekaert, G., & Hodrick, R. J. (2008). International financial management. Pearson Education.
Berk, J., DeMarzo, P., & Harford, J. (2008). Fundamentals of corporate finance. Pearson Education.
Blake, D. (1999). Financial market analysis (2nd ed.). New York, NY: John Wiley & Sons.
Blume, M. E. (1975). Betas and their regression tendencies. The Journal of Finance, 30(3), 785-795.
Bodie, Z., Kane, A., & Marcus, A. J. (2004). Investments (6th ed.). New York, NY: McGraw Hill.
Brealey, R. A., Myers, S. C., & Allen, F. (2005). Principles of corporate finance (8th ed.). New York, NY: McGraw-Hill/Irwin.
Brennan, M. J., & Li, F. (2008). Agency and asset pricing. UCLA Working Paper. SSRN No. 1104546.
Brigham, E., & Gapenski, L. C. (1977). Financial management: Theory and practice. Dryden Press.
Brigham, E., & Houston, J. F. (2009). Fundamentals of financial management (12th ed.). Thomson One.
Broquet, C., Cobbaut, R., Gillet, R., & van den Bergh, A. (2004). Gestion de portefeuille (4th ed.). De Boeck.
Brown, S. J., & Warner, J. B. (1985). Using daily stock returns: The case of event studies. Journal of Financial Economics, 14(1), 3-31.
Bruner, R. F. (1999). Instructor’s resource manual to accompany case studies in finance (3rd ed.). New York, NY: McGraw-Hill/Irwin.
Bruner, R. F. (2004). Applied mergers and acquisitions. New York, NY: John Wiley & Sons.
Bruner, R. F., Eades, K., Harris, R., & Higgins, R. (1998). Best practices in estimating the cost of capital: Survey and synthesis. Financial Practice and Education, 8(1), 13-28.
Buss, A., & Vilkov, G. (2009). Option-implied correlation and factor betas revisited. SSRN WP No. 1301437.
Campbell, J. Y., & Vuolteenaho, T. (2004). Bad beta, good beta. American Economic Review, 94, 1249-1275.
Carhart, M. M. (1997). On persistence in mutual fund performance. Journal of Finance, 52, 57-82.
Chrissos, J., & Gillet, R. (2008). Décision d investissement (2nd ed.). Collection Gestion appliquée, Pearson, Paris.
Christoffersen, P., Jacobs, K., & Vainberg, G. (2006). Forward-looking betas. Working Paper, Faculty of Management, McGill University.
Cochrane, J. (2005). Asset pricing. Princeton University Press.
Comer, G., Larrymore, N., & Rodriguez, J. (2009). Controlling for fixed income exposure in portfolio evaluation: Evidence from hybrid mutual funds. Review of Financial Studies, 22, 481-507.
Copeland, T., Koller, T., & Murrin, J. (2000). Valuation: Measuring and managing the value of companies (3rd ed.). New York, NY: Wiley.
Copeland, T., Weston, F., & Shastri, K. (2005). Financial theory and corporate policy (4th ed.). Pearson Addison-Wesley.
Cunningham, L. A. (2001). How to think like benjamin graham and invest like warren buffett. New York, NY: McGraw-Hill Publishing.
Da, Z., Guo, R., & Jagannathan, R. (2009). CAPM for estimating the cost of equity capital: Interpreting the empirical evidence. NBER Working Paper No. 14889.
Damodaran, A. (1994). Damodaran on valuation. New York: John Wiley.
Damodaran, A. (2001). The dark side of valuation. New York, NY: Prentice-Hall.
Damodaran, A. (2005). Applied corporate finance: A user’s manual (2nd ed.). New York, NY: Wiley.
Damodaran, A. (2006). Damodaran on valuation (2nd ed.). New York: John Wiley and Sons.
Danthine, J. P., & Donaldson, J. B. (2001). Intermediate financial theory. Prentice-Hall.
Daveni, R. A., & Ilinitch, A. Y. (1992). Complex patterns of vertical integration in the forest products industry—Systematic and bankruptcy risks. Academy of Management Journal, 35(3), 596-625.
Derrig, R. A., & Orr, E. D. (2004). Equity risk premium: Expectations great and small. North American Actuarial Journal, 8(1), 45-69.
Dimson, E., Marsh, P., & Staunton, M. (2002). Triumph of the optimists: 101 years of global investment returns. Princeton University Press.
Dimson, E., Marsh, P., & Staunton, M. (2006). DMS global returns data module. Chicago, Ibbotson Associates.
Duffie, J. (2001). Dynamic asset pricing theory (3rd ed.). Princeton University Press.
Eiteman, D. K., Stonehill, A. I., & Moffett, M. H. (2006). Multinational business finance (11th ed.). Addison Wesley.
Elton, E. J., Gruber, M. J., Brown, S. J., & Goetzmann, W. N. (2006). Modern portfolio theory and investment analysis (7th ed.). Wiley.
Fabozzi, F. J., & Francis, J. C. (1977). Stability tests for alphas and betas over bull and bear market conditions. The Journal of Finance, 32(4), 1093-1128.
Fama, E. (1976). Foundations of finance. New York: Basic Books Inc.
Fama, E., & French, K. (1992). The cross-section of expected stock returns. Journal of Finance, 47, 427-466.
Fama, E., & French, K. (1996). The CAPM is wanted, dead or alive. Journal of Finance, 51, 1947-1958.
Fama, E., & French, K. (2004). The CAPM: Theory and evidence. Journal of Economic Perspectives, 18, 25-46.
Fernandez, P. (2009). Market risk premium used in 2008 by professors: A survey with 1,400 answers. SSRN No. 1344209.
Fernandez, P. (2014). Are calculated betas worth for anything? SSRN No. 504565. Retrieved from http://ssrn.com/abstract=504565
Fernandez, P., & Bermejo, V. (2012). Beta = 1 does a better job than calculated betas. SSRN No. 1406923.
Furman, E., & Zitikis, R. (2009). General Stein-type decompositions of covariances and the CAPM. SSRN No. 1103333.
Genton, M., & Ronchetti, E. (2008). Robust prediction of beta. In E. J. Kontoghiorghes, B. Rustem, and P. Winker (Eds.), Computational methods in financial engineering (pp. 147-161). Berlin: Springer.
Gitman, L. (2008). Principles of managerial finance (5th ed.). Addison Wesley.
Gooding, A. R., & O’Malley, T. P. (1977). Market phase and the stationarity of beta. Journal of Financial and Quantitative Analysis, 833-857.
Grabowski, R. J. (2009). Problems with cost of capital estimation in the current environment—Update 1.
Graham, J. R., & Harvey, C. R. (2007). The equity risk premium in january 2007: Evidence from the Global CFO Outlook Survey. Icfai Journal of Financial Risk Management, IV, No. 2, 46-61.
Grinblatt, M., & Titman, S. (2001). Financial markets & corporate strategy (2nd ed.). New York, NY: McGraw-Hill/Irwin.
Hamada, R. S. (1972). The effect of the firm’s capital structure on the systematic risk of common stocks. Journal of Finance, 27, 435-452.
Hawawini, G. (1983). Why beta shifts as the return interval changes. Financial Analysts Journal, May-June, 73-77.
Higgins, R. (2009). Analysis for financial management (9th ed.). McGraw Hill Higher Education.
Hirshey, J., & Pappas, M. (1990). Managerial economics. Thomson Learning.
Howard, M. (2008). Accounting and business valuation methods. Elsevier.
Huang, C. F., & Litzemberger, R. (1988). Foundations for financial economics. North-Holland.
Hull, J. (2009). Risk management and financial institutions (2nd ed.). Prentice Hall.
Jensen, M. (1968). The performance of mutual funds in the period 1945-1964. Journal of Finance, 23(2), 389-416.
Jordan, B., & Miller, T. (2006). Fundamentals of investments (4th ed.). New York, NY: McGraw-Hill/Irwin.
Kahn, R., & Grinold, R. (1999). Active portfolio management (2nd ed.). New York, NY: McGraw-Hill.
Kaplan, S., & Andrade, G. (1998). How costly is financial (not economic) distress? Evidence from highly leveraged transactions that became distressed. Journal of Finance, 53, 1443-1494.
Keown, A., Petty, W., Martin, J., & Scott, D. (2006). Foundations of finance: The logic and practice of finance management (5th ed.). Prentice Hall.
Koller, T., Goedhart, M., & Wessels, D. (2005). Valuation: Measuring and managing the value of companies (4th ed.). McKinsey & Company, Inc. Wiley.
Kothary, S. P., & Shanken, J. (1995). In defense of beta. Journal of Applied Corporate Finance, 8, 53-58.
Kothary, S. P., & Shanken, J. (1999). Beta and book-to-market: Is the glass half full or half empty? Simon School of Business Working Paper FR 97-20.
Levy, H. (1984). Measuring risk and performance over alternative investment horizons. Financial Analysts Journal, 40(2), 61-68.
Levy, H. (1998). Principles of corporate finance. South-Western Educational Publishing.
Lintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. Review of Economics and Statistics, 47, 13-37.
Lintner, J. (1969). The aggregation of investor’s diverse judgments and preferences in purely competitive security markets. Journal of Financial and Quantitative Analysis, 347-400.
Lobe, S., Niermeier, T., Essler, W., & Roder, K. (2008). Do managers follow the shareholder value principle when applying capital budgeting methods? SSRN No. 1089379.
Los, C. A. (2000). Computational finance. World Scientific Publishing Co.
Los, C. A. (2003). Financial market risk: Measurement & analysis (2nd ed.). Routledge.
Mamaysky, H., Spiegel, M., & Zhang, H. (2007). Improved forecasting of mutual fund alphas and betas. Review of Finance, 11, 359-400.
Mandelker, G. N., & Rhee, S. G. (1984). The impact of the degrees of operating and financial leverage on systematic risk of common stock. Journal of Financial and Quantitative Analysis, 19(1), 45-57.
Marín, J. M., & Rubio, G. (2009). Economía financiera. Antonio Bosch Ed.
Markowitz, H. M. (1952). Portfolio selection. Journal of Finance, 7(1), 77-99.
Markowitz, H. M. (1959). Portfolio selection: Efficient diversification of investments. Cowles Foundation Monograph No. 16. New York: John Wiley & Sons, Inc.
Markowitz, H. M. (2005). Market efficiency: A theoretical distinction & so what? Working Paper.
Mascarenas, J. (2005). Fusiones y adquisiciones de empresas (4th ed.). Madrid: McGraw Hill.
Mossin, J. (1966). Equilibrium in a capital asset market. Econometrica, 34, 768-783.
Murphy, A. (2000). Scientific investment analysis (2nd ed.). Quorum Books.
Nagel, G. L., Peterson, D. R., & Pratti, R. (2007). The effect of risk factors on estimating the cost of equity. Quarterly Journal of Business and Economics (Finance and Accounting), 46(1), 61-87.
Palepu, K. G., & Healy, P. M. (2007). Business analysis and valuation: using financial statements (4th ed.). South-Western College Pub.
Pereiro, L. E. (2002). Valuation of companies in emerging markets (1st ed.). Wiley.
Pike, R., & Neale, B. (2003). Corporate finance & investment: Decisions & strategies (Pearson 4th ed.). Financial Times Management.
Reilly, F. K., Wright, D. J., & Chan, K. C. (2000). Bond market volatility compared to stock market volatility. Journal of Portfolio Management, 82-92.
Reinhart, C. M., & Rogoff, K. S. (2010). Growth in a time of debt. American Economic Review, 100(2), 573-578.
Rohini, S. (2008a). Beta estimation in the Indian stock market: Stability, stationarity and computational considerations. Decision, 35(2), 63-86.
Rohini, S. (2008b). Beta stationarity over bull and bear markets in India. ICFAI Journal of Applied Finance, 14(4), 32-47.
Rojo, A. (2007). Valoración de empresas y gestion basada en valor. Editorial Thompson Paraninfo.
Roll, R. (1977). A critique of the asset pricing theory’s tests. Journal of Financial Economics, 4(2), 129-176.
Ross, S. A., Westerfield, R. W., & Jaffe, J. F. (1993). Corporate finance (3rd ed.). Homewood, IL: Irwin/McGraw-Hill.
Ross, S. A., Westerfield, R. W., & Jaffe, J. F. (2005). Corporate finance (7th ed.). Homewood, IL: McGraw-Hill/Irwin.
Scholes, M., & Williams, J. (1977). Estimating betas from nonsynchronous data. Journal of Financial Economics, 5, 309-327.
Shapiro, A. C. (2005). Capital budgeting and investment analysis. Prentice Hall.
Sharpe, W. (1964). Capital asset prices: A theory of capital market equilibrium under conditions of risk. Journal of Finance, 19, 425-442.
Shenoy, C., & McCarthy, K. (2008). Applied portfolio management: How University of Kansas students generate alpha to beat the street. Wiley Finance.
Shirreff, D. (2004). Dealing with financial risk. The Economist.
Smith, R. L., & Kiholm-Smith, J. (2003). Entrepreneurial finance (2nd ed.). Wiley.
Statman, M. (1981). Betas compared: Merrill Lynch vs. Value Line. Journal of Portfolio Management, 7(2), 41-44.
Tole, T. M. (1981). How to maximize stationarity of beta. The Journal of Portfolio Management, 7(2), 45-49.
Treynor, J. (1965). How to rate management of investment funds. Harvard Business Review, 43, 63-75.
Turner, T. (2005). Short term trading in the new stock market. St. Martin’s Griffin.
Vasicek, O. A. (1973). A note on using cross-sectional information in Bayesean estimation of security betas. The Journal of Finance, 28(5), 1233-1239.
Womack, K. L., & Zhang, Y. (2003). Understanding risk and return, the CAPM, and the Fama-French three-factor model. Tuck Case No. 03-111. SSRN No. 481881.