Beta Coefficient Measurement Over Multi Horizons And Its Application To Investment Decision

Traditional empirical study on the capital market uses sample data to estimatebeta coefficient. When these study need to measure yield rate, the researcher willususally randomly select a sample horizon to calculate the yield and variance of theassets in different horizons, thus they can measure the beta coefficient ofmulti-horizon assets. In fact, the simple processing implied that the expected returnand variance of the assets in different horizons are independent of each other. But inthe practice of the investment, because of the complexity of investment environment,the investors need to constantly adjust the investment horizons of assets, and there issignificant correlation in yield between the investment horizons. Therefore, there isnon–systematic error if we make the beta coefficient of any investment horizon as abenchmark to get the multi-horizon beta coefficient. How to measure themulti-horizon beta coefficient effectively is one of the research topics with hightheoretical and practical significance.In this paper, the author mainly makes an empirical research on the measurementand error of multi-horizon portfolio, and analyzes the change trend of beta coefficientof multi-horizon risk stocks. Specifically, there are three parts: first, read the existingliterature about the relation between the investment horizon and beta coefficient, andsummarize the thought, method and research limitations of the multi-horizon betacoefficient. Second, based on the research on the correlation between the investmenthorizon and beta coefficient, this paper makes some improvement about betacoefficient of multi-horizon portfolio. Then combined with the Shanghai compositeindex and the Shanghai50index, the author demonstrates that it can improve theeffectiveness of beta coefficient on the basis of the mean and variance of variableyield rate, and thus propose the error correction mehod of beta coefficient. Third, theauthor describes the relationship between multi-horizon beta coefficient and stockrisk theoretically, and then makes a comparision of the trend of beta coefficientbetween offensive stocks and defensive stocks with the Shanghai composite index andthe Shanghai50index as a sample to provide guidance for the investors who dointer-temporal investment.Improving the measurement of beta coefficient of multi-horizon assets aims ateliminating the non-sysematic error of multi-horizon beta coefficient, which can provide support for inter-temporal investment decision-making and risk management.