RT Journal Article
SR Electronic
T1 Evaluating the Accuracy of Beta Forecasts
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 84
OP 93
DO 10.3905/jpm.2016.42.3.084
VO 42
IS 3
A1 Jose G. Menchero
A1 Zoltan Nagy
A1 Ashutosh Singh
YR 2016
UL https://pm-research.com/content/42/3/84.abstract
AB The authors present a methodology to compare the accuracy of beta forecasts. They show that residual volatility is minimized when true (unobservable) betas are used. The authors relate the level of error in the beta estimate to the realized residual volatilities and then use their approach to compare the accuracy of several beta estimates. In particular, they find that the predicted betas from a factor risk model are significantly more accurate than the historical betas derived from a time-series regression.TOPICS: Analysis of individual factors/risk premia, factor-based models, volatility measures