Investigating the merits of using a Kalman Filter in equity Beta estimation
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- Master of Science 
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.
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2018