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Flexible Least Squares Betas: The French Market Case

Author

Listed:
  • Chauveau, T.
  • Maillet, B.

Abstract

A compatison between the most popular methods used to value systematic risk, using simulated series is, first, porposed. It appears that the Flexible Least Squares (FLS) methos - first proposed by Kalaba et Tesfatsion (1989) and later generalized by Lutkepohl and Herwatz (1996) - outclasses its challengers, when the actual beta is time-varying. Beta coefficients of many French stock returns are subsequently estimated, using the FLS method. The accuracy of the adjustments is higher than that of the ones using other methods (recursive or moving least squares) and the forecasting errors smaller.

Suggested Citation

  • Chauveau, T. & Maillet, B., 1998. "Flexible Least Squares Betas: The French Market Case," Papers 1998-03/fi, Caisse des Depots et Consignations - Cahiers de recherche.
    • Handle: RePEc:fth:cadeco:1998-03/fi
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    Citations

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    Cited by:

    1. Vêlayoudom Marimoutou & Denis Peguin & Anne Peguin-Feissolle, 2009. "The "distance-varying" gravity model in international economics: is the distance an obstacle to trade?," Economics Bulletin, AccessEcon, vol. 29(2), pages 1139-1155.
    2. Markus Ebner & Thorsten Neumann, 2008. "Time-varying factor models for equity portfolio construction," The European Journal of Finance, Taylor & Francis Journals, vol. 14(5), pages 381-395.
    3. Markus Ebner & Thorsten Neumann, 2005. "Time-Varying Betas of German Stock Returns," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 19(1), pages 29-46, June.
    4. Ewa Feder-Sempach & Piotr Szczepocki & Wiesław Dębski, 2023. "What if beta is not stable? Applying the Kalman filter to risk estimates of top US companies over the long time horizon," Bank i Kredyt, Narodowy Bank Polski, vol. 54(1), pages 25-44.

    More about this item

    Keywords

    LEAST SQUARE ; FRANCE ; RISK;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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