Premium
Empirical Estimates of Beta When Investors Face Estimation Risk
Author(s) -
CLARKSON PETER M.,
THOMPSON REX
Publication year - 1990
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1990.tb03697.x
Subject(s) - intuition , earnings , econometrics , economics , empirical research , beta (programming language) , actuarial science , financial economics , estimation , public information , systematic risk , business , statistics , finance , mathematics , computer science , psychology , management , internet privacy , programming language , cognitive science
We examine empirical implications of models of differential information that formalize the following intuition: securities for which there is relatively little information are perceived as relatively more risky because of the greater uncertainty surrounding the exact parameters of their return distributions. The implication that beta risk for low information firms should decline as information increases is confirmed with several data sets. We find such a decline over the first several periods subsequent to initial public offerings and initial listings. There is also an abrupt risk decline at the first annual earnings announcement.