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The Role of Stock Size and Trading Intensity in the Magnitude of the "Interval Effect" in Beta Estimation: Empirical Evidence from the Polish Capital Market

Author

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  • Janusz Brzeszczyński
  • Jerzy Gajdka
  • Tomasz Schabek

Abstract

In this paper, we present empirical evidence about the "interval effect" in estimation of beta parameters for stocks listed on the Warsaw Stock Exchange. We analyze models constructed for the returns calculated using intervals of different length—that is, 1, 5, 10, and 21 trading days (corresponding to, roughly, 1 day, 1 week, 2 weeks, and 1 month, respectively). In the cases in which heteroskedasticity was present, we estimated ARCH models. The results indicate that the estimates of betas for the same stock differ considerably when various return intervals are used. We further explore the source of differences in betas for every stock by investigating the relations between them and such factors as stock size and its trading intensity. The empirical results provide evidence that a statistically significant relationship exists between these two characteristics of stocks. This finding has important practical implications for beta estimation in practice.

Suggested Citation

  • Janusz Brzeszczyński & Jerzy Gajdka & Tomasz Schabek, 2011. "The Role of Stock Size and Trading Intensity in the Magnitude of the "Interval Effect" in Beta Estimation: Empirical Evidence from the Polish Capital Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(1), pages 28-49, January.
    • Handle: RePEc:mes:emfitr:v:47:y:2011:i:1:p:28-49
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    Cited by:

    1. Bartłomiej Lisicki, 2023. "Sektorowe zróżnicowanie efektu interwału akcji spółek z GPW w dobie pandemii COVID-19," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 2, pages 174-194.
    2. Joanna Olbryś & Elżbieta Majewska, 2014. "Implications of market frictions: serial correlations in indexes on the emerging stock markets in Central and Eastern Europe," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 24(1), pages 51-70.

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