Betas and Industry Weights

Australian Journal of Management, Vol. 29, No. 1, pp. 109-120, 2004

Posted: 12 Jan 2010

See all articles by Martin Lally

Martin Lally

Capital Financial Consultants Ltd

Date Written: 2004

Abstract

This paper explores the impact on industry betas of changes to the industry weights in the market index against which betas are defined. The exploratory analysis in the paper suggests that the effect can be substantial. This phenomenon has implications for the way in which betas are estimated from time series data, and also for the common practice of using beta estimates from one country to estimate those in another. Possible solutions to the problems arising there from changes or variations in industry weights are suggested.

Keywords: Beta, Industry weights

JEL Classification: G32, C13, C51

Suggested Citation

Lally, Martin, Betas and Industry Weights (2004). Australian Journal of Management, Vol. 29, No. 1, pp. 109-120, 2004, Available at SSRN: https://ssrn.com/abstract=1535021

Martin Lally (Contact Author)

Capital Financial Consultants Ltd ( email )

Wellington 6012
New Zealand
64 4 4768645 (Phone)

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