Environment Systems and Decisions

, Volume 36, Issue 2, pp 126–141 | Cite as

Beta estimates of shares on the JSE Top 40 in the context of reference-day risk

  • Christopher Baker
  • Kanshukan Rajaratnam
  • Emlyn James Flint


A topic of interest in the finance world is measuring systematic risk. Accurately measuring the systematic risk component—or Beta—of an asset or portfolio is important in many financial applications. In this work, we consider the efficiency of a range of Beta estimation methods commonly used in practice from a reference-day risk perspective. We show that, when using the industry standard data sample of 5 years of monthly returns, the choice of reference-day used to calculate underlying returns has a significant impact on all of the Beta estimation methods considered. Driven by this finding, we propose and test an alternative nonparametric bootstrap approach for calculating Beta estimates which is unaffected by reference-day risk. Our primary goal is to determine a point-estimate of Beta, independent of reference-day.


Reference-day risk Bootstrap Systematic risk Beta 



This work is based on the research supported in part by the National Research Foundation (NRF) of South Africa for the Grant No. 93649. Any opinion, finding and conclusion or recommendation expressed in this material is that of the authors and the NRF does not accept any liability in this regard. Additional funding was provided by University of Cape Town Research Office through the Research Development Grant and the Conference Travel Grant.


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Christopher Baker
    • 1
  • Kanshukan Rajaratnam
    • 2
  • Emlyn James Flint
    • 3
  1. 1.Section of Actuarial ScienceUniversity of Cape TownRondeboschSouth Africa
  2. 2.Department of Finance and Tax, and the African Collaboration for Quantitative Finance and Risk ResearchUniversity of Cape TownRondeboschSouth Africa
  3. 3.Peregrine Securities, Claremont, South Africa and Department of Mathematics and Applied MathematicsUniversity of PretoriaHatfieldSouth Africa

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