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Market Phase and the Stationarity of Beta

Published online by Cambridge University Press:  19 October 2009

Arthur E. Gooding  and
Terence P. O'Malley
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Extract

This paper examines the stationarity of beta coefficients, especially in regard to recent, major stock market trends. In addition to the usual correlation tests for stationarity, this paper describes a more direct method for testing the stationarity of portfolio betas. The method involves the use of paired t-tests which show separately the degree of stationarity for each portfolio beta. In the process of testing for stationarity, the portfolio betas also are adjusted for measurement error using a formulation suggested by Blume [3].

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 12 , Issue 5 , December 1977 , pp. 833 - 857
Copyright
Copyright © School of Business Administration, University of Washington 1977

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