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Estimation of betas of stocks with low liquidity

Author

Listed:
  • Ricardo Goulart Serra

    (Insper / IBMEC-SP and FIA)

  • Roy Martelanc

    (University of São Paulo)

Abstract

This paper examines the procedure to estimate betas for firms whose shares are not traded every day. Betas are estimated by three methods: repetition of the last quotation (RUC), tradeto-trade (TT) and Scholes-Williams’ adjustment (SW). There are three return intervals: daily, weekly and monthly. The objective is to verify the consistency of the betas estimated by the different calculation methods and the different return intervals. The results indicate that for shares not traded every day, the betas could be estimated with better precision by the TT method with daily intervals.

Suggested Citation

  • Ricardo Goulart Serra & Roy Martelanc, 2013. "Estimation of betas of stocks with low liquidity," Brazilian Business Review, Fucape Business School, vol. 10(1), pages 49-78, January.
    • Handle: RePEc:bbz:fcpbbr:v:10:y:2013:i:1:p:49-78
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    References listed on IDEAS

    as
    1. Fowler, David J. & Rorke, C. Harvey, 1983. "Risk measurement when shares are subject to infrequent trading : Comment," Journal of Financial Economics, Elsevier, vol. 12(2), pages 279-283, August.
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