The Research Of Projection BETA Coefficient In Chinese Security Market

In the single-index model (market model), beta coefficient measure the sensitivity of an asset relative to changes in market index returns, or deviation of changes in asset returns relative to changes in market index returns. Beta coefficient of asset is widely used in portfolio management. Beta coefficient of a portfolio is the weighted average of beta coefficient of each asset in the portfolio. The portfolio manager can predict future market trends and dynamically adjust the portfolio's Beta coefficient, so as to achieve the effect of active management. Therefore, correctly calculating the beta coefficient of asset plays a very important role in portfolio management. Typically, beta coefficient of asset is calculated by executing regression analysis on the asset's history return and market index's history returns. But beta coefficient calculated by this way is ex-post estimate, and it is doubtful to be used directly as beta coefficient for the next period. In fact, there is no convenient evidence that Beta coefficient over time is stable. The paper mainly discusses how to forecast beta coefficient of listed companies in Chinese security market, using regression analysis to identify predictive factors of beta coefficients, such as total assets, growth rate, cash dividend, financial leverage, current ratio and ROE. In the paper, based on Chinese security market price data and public information, the research is made by using multiple regression analysis to verify the forecast of beta coefficient of stocks listed on Chinese security market. The results show that the combination of historical beta coefficient and the company's fundamentals is much better than assuming the beta coefficient of the next period stable, but has no significant advantage compared with the assumption that beta coefficient of the next period come back to one.