tailieunhanh - THE ELASTICITY OF THE PRICE OF A STOCK AND ITS BETA

In recent years, senior citizens have increasingly become targets of financial abuse and fraud. Approximately 5 million senior citizens become victims of financial abuse and fraud each year. This trend is related to the high amount of wealth held by older investors as nearly one-third of all . investors are between 50 and 64 years of age. It is particularly devastating when older investors are defrauded because they are generally beyond or near the end of their earning years and as a result, have little or no ability to rebuild their retirement funds. The Securities. | JOURNAL OF APPLIED QUANTITATIVE METHODS Quantitative Methods Inquires THE ELASTICITY OF THE PRICE OF A STOCK AND ITS BETA Cyriac ANTONY MPh Lecturer Selection Grade in Statistics Sacred Heart College Thevara Kochi India E-mail cyriacantony2003@ . JEEVANAND PhD Reader in Statistics Union Christian College Aluva Kerala India E-mail radhajeevanand@ radhajeevanand@ Abstract Systematic risk in an investment in a security is measured by the security s beta. The beta of a stock is considered as a very important parameter in asset pricing. It is used to estimate the expected return of a stock with respect to its market return. Beta is estimated by the regression method. In this paper we consider some problems associated with the concept of beta and its estimation. We also advocate for the use of elasticity as an alternative to beta. Key words Beta CAPM characteristic line price index risk least squares elasticity IN h V r 1. Introduction Estimating the expected return on investments to be made in the stock market is a challenging job before an ordinary investor. Different market models and techniques are being used for taking suitable investment decisions. The past behaviour of the price of a security and the share price index plays a very important role in security analysis. The straight line showing the relationship between the rate of return of a security and the rate of market return is known as the security s characteristic line. The slope of the characteristic line is called the security s beta. The concept of beta introduced by Markowitz 1959 is being widely used to measure the systematic risk involved in an investment. Ordinary least square OLS method is used by researchers and practitioners for estimating the characteristic line. The measure beta is an inevitable tool in portfolio management. Asset pricing without beta is unimaginable. The Capital Asset Pricing Model CAPM is used to determine a theoretically appropriate .