Infrequent trading induces biased estimates of the beta risk coefficient. This paper reports on the efficacy of approaches that seek to correct for this bias and documents the extent of thin trading among New Zealand securities. Parameter estimates free of the thin‐trading bias are obtained. These are compared with estimates obtained using ordinary least squares (OLS) applied in the conventional manner to nonsynchronous data, with and without bias‐correcting procedures. OLS beta estimates are found to be less biased, more efficient, and as consistent when compared with Dimson or Scholes‐Williams estimators. Lower beta estimates are associated with lower trading frequencies.

Additional Metadata
Persistent URL dx.doi.org/10.1111/j.1475-6803.1994.tb00189.x
Journal Journal of Financial Research
Citation
Bartholdy, J. (Jan), & Riding, A.L. (1994). THIN TRADING AND THE ESTIMATION OF BETAS: THE EFFICACY OF ALTERNATIVE TECHNIQUES. Journal of Financial Research, 17(2), 241–254. doi:10.1111/j.1475-6803.1994.tb00189.x