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Estimating risk in capital asset pricing for interval-valued data

Author

Listed:
  • Dailys Maite Aliaga Reyes
  • Renata Maria Cardoso Rodrigues De Souza
  • Francisco José A. Cysneiros

Abstract

This paper proposes and analyses an approach to estimate the systematic risk in capital asset pricing with interval-valued data, using as variables the high and low prices contained in the financial databases to explain the asset returns. The approach takes into account the information within the daily intervals of high and low asset prices instead the most popular opening or closing prices for estimate the regression equation of the model, for calculations involving these intervals, the basic operations on interval arithmetic were used. Also, we propose an interpretation for the estimated interval beta-parameter. The approximation capabilities of the proposed model are illustrated by means of its application the daily high and low prices on Microsoft and the S%P500 index from 1 November 2013 to 15 January 2015. Using the proposed model with interval-valued data improves financial valuation of capital assets as compared to that using the standard econometric parameters.

Suggested Citation

  • Dailys Maite Aliaga Reyes & Renata Maria Cardoso Rodrigues De Souza & Francisco José A. Cysneiros, 2019. "Estimating risk in capital asset pricing for interval-valued data," International Journal of Business Information Systems, Inderscience Enterprises Ltd, vol. 32(4), pages 522-535.
    • Handle: RePEc:ids:ijbisy:v:32:y:2019:i:4:p:522-535
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