IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v26y1991i1p115-25.html
   My bibliography  Save this article

Markov Chains and Regression toward the Mean

Author

Listed:
  • Kolb, Robert W
  • Rodriguez, Ricardo J

Abstract

Using the theory of stationary Markov chains, the authors uncover a previously unknown property of the behavior of betas. Specifically, if the cross-sectional distribution of betas is stationary over time, then the set of firms that remain in an arbitrarily chosen beta interval between one period and the next will not regress toward the mean. This surprising result occurs in spite of the well-known fact that the set of all the firms in the interval will exhibit the regression tendency. The authors' empirical tests indicate that betas behave in remarkable accordance with this prediction. Copyright 1991 by MIT Press.

Suggested Citation

  • Kolb, Robert W & Rodriguez, Ricardo J, 1991. "Markov Chains and Regression toward the Mean," The Financial Review, Eastern Finance Association, vol. 26(1), pages 115-125, February.
    • Handle: RePEc:bla:finrev:v:26:y:1991:i:1:p:115-25
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pedro Antonio Martín-Cervantes & María del Carmen Valls Martínez, 2023. "Unraveling the relationship between betas and ESG scores through the Random Forests methodology," Risk Management, Palgrave Macmillan, vol. 25(3), pages 1-29, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:26:y:1991:i:1:p:115-25. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.