A comparison of the market model and random coefficient model using mergers as an event

Iqbal, Zahid; Dheeriya, Prakash L.

doi:10.1016/0148-6195(91)90009-l

Cited by 12 publications

(8 citation statements)

References 12 publications

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“…Others (e.g. Iqbal and Dheeriya 1991) have attempted to improve the estimation of beta risk by using mergers as an event and calculating the beta by a random coefficient regression model (see the methods of Swamy 1970;Pagan 1980), which is more indicative than OLS estimation when the assumptions underlying OLS do not hold.…”

Section: Literature Reviewmentioning

confidence: 99%

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A Dynamic and Stochastic Beta and Its Implications in Global Capital Markets

Lin

2000

International Finance

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This article investigates the dynamic and stochastic behaviour of the beta coefficient of the one-factor international capital asset pricing model (ICAPM), and its implications for the pricing of stock markets at the country level and the forecasting of stock returns in global stock markets. We apply several novel econometric techniques and conduct necessary statistical tests. We find that the ICAPM has a stochastic and dynamic beta coefficient and that the global stock market is efficient and integrated, and the world market portfolio is mean-variance efficient. We demonstrate that the dynamic and stochastic behaviour of country betas for the developed countries differs from that of developing economies. The empirical results indicate that the trend and the unexpected change of the foreign exchange rate contribute significantly to the variation patterns of country betas, and that explicit consideration of such changing characteristics will serve to increase the accuracy of stock return forecasts in global stock markets.

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Section: Literature Reviewmentioning

confidence: 99%

“…Therefore, the random beta model gains its momentum (e.g. Iqbal and Dheeriya 1991;Brooks et al 1992;Lin et al 1992). To show the beta's time-varying nature, the beta coefficient is specified as a variable mean response (VMR) process.…”

Section: A the Variable Mean Response Transformation Of The Icapmmentioning

confidence: 99%

A Dynamic and Stochastic Beta and Its Implications in Global Capital Markets

Lin

2000

International Finance

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“…Engle (1982) which was later modified into GARCH by Bollerslev (1986). Stock markets are associated with the element of uncertainty and due to such uncertain circumstances; investors prefer to forecast the performance of the market (Alam, Siddikee, & Masukujjaman, 2013;Akhtar & Khan, 2016 Iqbal and Dheeriya (1991) suggested that any abnormal returns in the market are because of the market risk and their distribution has a constant variance but Giaccoto and Ali (1982) contradicted such assumptions and argued that abnormal returns can be because of heteroscedasticity which is due to non-constant variance. Akgiray (1989) (Corhay & Rad, 1996).…”

Section: Methodsmentioning

confidence: 99%

Islamic Calendar Anomalies: Evidence from Pakistan

Syed¹,

Khan²

2017

BER

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“…One of these assumptions is that die coefficients of the market model are constant over time. This has been questioned by Iqbal and Dheeriya (1991) who employed a random coefficient regression model allowing betas to vary over time. They argued that the differences in abnormal returns obtained using the market model and their model can be attributed to the randomness in the beta coefficients.…”

Section: Introductionmentioning

confidence: 99%

Conditional heteroskedasticity adjusted market model and an event study

Corhay

Rad

1996

The Quarterly Review of Economics and Finance

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Stock returns series generally exhibit time-varying volatility. Therefore, one can cast doubt on the way abnormal returns are calculated and consequently interpreted in traditional event studies. In this paper we apply a market model which accounts for GARCH effects leading to more efficient estimators. Using a sample of divestitures, we empirically investigate how this adjustment affects the magnitude of the abnormal returns associated with an event.

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A comparison of the market model and random coefficient model using mergers as an event

Cited by 12 publications

References 12 publications

A Dynamic and Stochastic Beta and Its Implications in Global Capital Markets

A Dynamic and Stochastic Beta and Its Implications in Global Capital Markets

Islamic Calendar Anomalies: Evidence from Pakistan

Conditional heteroskedasticity adjusted market model and an event study

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