i saw this in the exam 6 thread and i’ve been wondering the same thing the couple of times i’ve read it… schweser says that the larger the Z is, the faster beta gets to one. with the adjusted beta converging to one. Beta = Y + Z*Beta(last period)… Y + Z = 1 (and do both have to be between 0 and 1. not sure. wondered about that too) assume beta starts at 0.4 Y = 0.8, Z =.2 beta goes from 0.4, .88, .976, .995 Y =.2 Z = .8 beta goes from .4, .52, .616, .69, .754 basically as earlier guy said in other thread, if intercept is 1 and coeff zero, beta will be one. and if opposite, it will just stay at the same level forever… probably be a problem with unit root in at least one of the cases, but i don’t want to think about that.
It is incorrectly listed in the study notes…the slides for the 3-Day Schweser seminar have it stated the exact opposite.
I believe it should be “the larger the Y, the faster Beta gets to one.”
What is this from?
mwvt9 Wrote: ------------------------------------------------------- > What is this from? schweser book… apparently they have it wrong (thank you spongebob)… it’s using adjusted beta. not sure what page or even reading (equity makes sense… but it might be corp fin)