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AN EMPIRICAL INVESTIGATION OF BETA STABILITY: PORTFOLIOS VS. INDIVIDUAL SECURITIES
Author(s) -
GregoryAllen Russell,
Impson C. Michael,
Karafiath Imre
Publication year - 1994
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1994.tb00355.x
Subject(s) - portfolio , beta (programming language) , economics , stock (firearms) , financial economics , sample (material) , econometrics , stability (learning theory) , empirical research , actuarial science , mathematics , statistics , computer science , mechanical engineering , chemistry , chromatography , machine learning , engineering , programming language
The concept that portfolio betas are more stable than betas for individual securities has become the ‘conventional wisdom’ in finance; statements to this effect may be found in many popular finance textbooks. The objective of this paper is to challenge the conventional wisdom. A random sample of individual stock returns and portfolio returns is used to compare the empirical distribution of beta shifts for individual firms and portfolios. The number of statistically significant changes in beta are no greater for individual securities than for portfolios.