Investigating the merits of using a Kalman Filter in equity Beta estimation
Master thesis
Permanent lenke
http://hdl.handle.net/11250/2579010Utgivelsesdato
2018Metadata
Vis full innførselSamlinger
- Master of Science [1621]
Sammendrag
The concept of using alpha and beta to gauge the validity of an investment has
been used extensively in both an academic as well as a professional setting.
Despite its extensive use, the method of obtaining the alphas and betas estimates
is deceptively simple and makes a number of unrealistic assumptions. This report
aims to investigate the merits of using a Kalman Filter in equity beta and alpha
estimation and thereby circumvent some of the issues of the more traditional
approach. Final results show that the error improvements are non-existent or
marginal at best. However, while the merits of the Kalman filtering technique is
lackluster in this report, it makes a strong case further analysis into the area is
warranted.
Beskrivelse
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2018