This paper shows that the OLS estimates for beta in a small stock market are likely to be biased upward because of endogenous market returns. Applying the Hausman test to the monthly stock return data for Thailand and Hong Kong, we find the OLS estimates inconsistent. The OLS estimates are larger than the consistent estimates obtained by the instrumental method. This confirms our expectation that the OLS estimates are biased upward. Copyright © 1994 Published by Elsevier B.V.
|Journal||Pacific-Basin Finance Journal|
|Publication status||Published - Jan 1994|
CitationWoo, C.-K., Cheung, Y.-L., & Ho, R. Y.-K. (1994). Endogeneity bias in beta estimation: Thailand and Hong Kong. Pacific-Basin Finance Journal, 2(4), 453-461. doi: 10.1016/0927-538X(94)90005-1
- Capital asset pricing model
- Beta estimation
- Emerging Asian equity markets