Please use this identifier to cite or link to this item:
https://hdl.handle.net/20.500.14279/9608
Title: | Stock return outliers and beta estimation: The case of U.S. pharmaceutical companies |
Authors: | Theodossiou, Alexandra K. Theodossiou, Panayiotis |
metadata.dc.contributor.other: | Θεοδοσίου, Παναγιώτης |
Major Field of Science: | Social Sciences |
Field Category: | Economics and Business |
Keywords: | Equity cost of capital;OLS estimation;Pharmaceutical industry;Robust M estimation;Stock beta |
Issue Date: | 1-May-2014 |
Source: | Journal of International Financial Markets, Institutions and Money, 2014, vol. 30, no. 1, pp. 153-171 |
Volume: | 30 |
Issue: | 1 |
Start page: | 153 |
End page: | 171 |
Journal: | Journal of International Financial Markets, Institutions and Money |
Abstract: | Efficient estimation of the equity cost of operating public corporations is essential for a rational investment policy. Traditional OLS beta estimates of a single stock are known to suffer from violations of normality due to outliers - extreme returns caused by large, unpredictable company-specific events. We confirm the presence of an outliers-driven, often significant bias in OLS beta estimates by undertaking parallel estimates with a related method based on a mixed-return model that follows Huber's Robust M (HRM) estimator. We demonstrate that the OLS bias can be substantial even in a sample spanning 18 years of monthly observations. |
URI: | https://hdl.handle.net/20.500.14279/9608 |
ISSN: | 10424431 |
DOI: | 10.1016/j.intfin.2014.02.002 |
Rights: | © Elsevier |
Type: | Article |
Affiliation : | Texas A and M University Cyprus University of Technology |
Publication Type: | Peer Reviewed |
Appears in Collections: | Άρθρα/Articles |
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