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Economic research - Ekonomska istraživanja, Vol.26 No.2 June 2013.

Original scientific paper

PARAMETERS THAT PROVIDE HIGHER EXPLANATION ESTIMATING BETAS IN THE PORTUGUESE STOCK MARKET

Angel Barajas
Sonia Carvalho

Fulltext: english, pdf (1 MB) pages 117-128 downloads: 455* cite
APA
Barajas, A., Carvalho, S. (2013). PARAMETERS THAT PROVIDE HIGHER EXPLANATION ESTIMATING BETAS IN THE PORTUGUESE STOCK MARKET. Economic research - Ekonomska istraživanja, 26(2), 117-128. Retrieved from http://hrcak.srce.hr/104029

Abstracts
During decades, tests have been developed to verify whether the beta is the best tool to explain the returns of securities on the stock market. Moreover, the value of the beta and its coefficient of determination (R-squared) vary with different parameters used for estimating the beta. In this paper, we investigate for the parameters that provide a higher explanation when we estimate the beta on the Portuguese stock market. We use all nine economic groups listed on the Euronext Lisbon and, for each of those groups, determine which company has the highest market capitalization and highest turnover at the same time, measured in millions of Euros and thousands of Euros, respectively. The linear regression and correlation coefficient between each of the companies can be calculated by studying two national indexes (PSI20 and PSI General) to determine if they get better results with respect to a given period, frequency data or index.
We conclude that the explanatory power of R-squared in the Portuguese stock market is very low, independent of the parameters used. When analyzing the year 2008 using linear regression, it remains unclear whether it is preferable to use daily returns or weekly returns, since half of the surveyed companies report the highest yield using either method. The explanatory power of R-squared is higher when using extended time periods and monthly returns, and the results become more accurate when doing the regressions with the PSI20 Index.

Keywords
Beta; Coefficient of determination; Risk; Portuguese Stock Market; Valuation

Hrčak ID: 104029

URI
http://hrcak.srce.hr/104029

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