Measuring systematic risk using implicit beta

Article Abstract:

A new method for measuring the systematic (beta) risk of a company's stock is introduced. It employs the 'implicit beta' derived from option price to trade shares of stock for shares of a market index. This method is proposed as an alternative to the estimation technology currently in use, which is based on regression analysis of historical data. The existing approach is flawed because it brings in considerable statistical error to beta estimates that cannot accurately represent prevailing market conditions. The use of the implicit beta technology would provide significant benefits to those involved with the theory and practice of finance because it will provide accurate, real time indicators of the systematic risk levels of company stock.

Methods, Risk assessment, Evaluation, Stocks, Options (Finance), Capital assets pricing model, Capital asset pricing model

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The distribution of the instrumental variables estimator and its t-ratio when the instrument is a poor one

Article Abstract:

An investigation of instrumental variables estimation is presented. The research considers the distribution of the instrumental variables estimator and its t-ratio when the instrument is weakly correlated with explanatory variables.

Research, Economic research, Instrumental variables (Statistics), Instrumental variables

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