Measuring the stock's factor beta and identifying risk factors under market inefficiency

摘要

We provide a closed-form measure of the stock's factor-specific beta coefficient that allows for a delay in the reaction of stock prices to systematic information. This measure explicitly relates the stock's factor beta to the investment horizon and enables investors to determine the return measurement interval that is required for the stock's factor beta to fully reflect the stock's factor risk. Exploiting daily data on individual NYSE, Nasdaq, and AMEX-listed common stocks, we use this measure to estimate and investigate the properties of the stock's beta with respect to the market.(c) 2021 Board of Trustees of the University of Illinois. Published by Elsevier Inc. All rights reserved.