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An examination of factors influencing airline beta values

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  • Hung, Jung-Hua
  • Liu, Yong-Chin

Abstract

The beta value, an indicator of systematic risk, is used to estimate the costs of equity and the evaluation of a stock's reasonable price. It is useful to airlines because their capital assets and operations are relatively sensitive to systematic risks. To obtain better estimates, it is useful to identify the causes for fluctuations in beta values. This examines the volatility of airline betas in the capital asset pricing and three-factor pricing models, as well as exploring the potential factors affecting their values. The findings suggest that airline betas are volatile over time and that crashes and stock market trends may also impact them. The business cycle, operating and financial leverage, and capital structure all positively influence the sample airlines’ betas as well. The effects of return on equity on betas are negative, and liquidity might also affect betas.

Suggested Citation

  • Hung, Jung-Hua & Liu, Yong-Chin, 2005. "An examination of factors influencing airline beta values," Journal of Air Transport Management, Elsevier, vol. 11(4), pages 291-296.
    • Handle: RePEc:eee:jaitra:v:11:y:2005:i:4:p:291-296
    DOI: 10.1016/j.jairtraman.2005.01.004
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    References listed on IDEAS

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    Cited by:

    1. Lai, Li-Hua, 2008. "An evaluation of fuzzy transportation underwriting systematic risk," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(9), pages 1231-1237, November.
    2. Akyildirim, Erdinc & Corbet, Shaen & O'Connell, John F. & Sensoy, Ahmet, 2021. "The influence of aviation disasters on engine manufacturers: An analysis of financial and reputational contagion risks," International Review of Financial Analysis, Elsevier, vol. 74(C).
    3. Zhong, Z.W. & Varun, Dhir & Lin, Y.J., 2017. "Studies for air traffic management R&D in the ASEAN-region context," Journal of Air Transport Management, Elsevier, vol. 64(PA), pages 15-20.
    4. T.G. Saji, 2018. "Predicting Market Betas," Paradigm, , vol. 22(2), pages 160-174, December.
    5. Akyildirim, Erdinc & Corbet, Shaen & Efthymiou, Marina & Guiomard, Cathal & O'Connell, John F. & Sensoy, Ahmet, 2020. "The financial market effects of international aviation disasters," International Review of Financial Analysis, Elsevier, vol. 69(C).
    6. Yaghoub Abdi & Xiaoni Li & Xavier Càmara-Turull, 2023. "Firm value in the airline industry: perspectives on the impact of sustainability and Covid-19," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-24, December.
    7. See, Kok Fong & Abdul Rashid, Azwan, 2016. "Total factor productivity analysis of Malaysia Airlines: Lessons from the past and directions for the future," Research in Transportation Economics, Elsevier, vol. 56(C), pages 42-49.
    8. Maria Ángeles Alcaide & Alberto Celani & Paula Cervera Chasan & Elena De La Poza, 2022. "Mathematical Modeling of the Financial Impact of Air Crashes on Airlines and Involved Manufacturers," Mathematics, MDPI, vol. 10(5), pages 1-18, February.
    9. Jenatabadi, Hashem Salarzadeh & Ismail, Noor Azina, 2014. "Application of structural equation modelling for estimating airline performance," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 25-33.

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