Title: Estimating risk in capital asset pricing for interval-valued data

Authors: Dailys Maite Aliaga Reyes; Renata Maria Cardoso Rodrigues De Souza; Francisco José A. Cysneiros

Addresses: Center of Informatics (CIn), Federal University of Pernambuco, Recife, PE, Brazil ' Center of Informatics (CIn), Federal University of Pernambuco, Recife, PE, Brazil ' Departament of Statistics, Federal University of Pernambuco, Recife, PE, Brazil

Abstract: This paper proposes and analyses an approach to estimate the systematic risk in capital asset pricing with interval-valued data, using as variables the high and low prices contained in the financial databases to explain the asset returns. The approach takes into account the information within the daily intervals of high and low asset prices instead the most popular opening or closing prices for estimate the regression equation of the model, for calculations involving these intervals, the basic operations on interval arithmetic were used. Also, we propose an interpretation for the estimated interval beta-parameter. The approximation capabilities of the proposed model are illustrated by means of its application the daily high and low prices on Microsoft and the S&P500 index from 1 November 2013 to 15 January 2015. Using the proposed model with interval-valued data improves financial valuation of capital assets as compared to that using the standard econometric parameters.

Keywords: capital asset pricing model; CAPM; interval-valued data; symbolic data analysis; SDA; regression.

DOI: 10.1504/IJBIS.2019.103795

International Journal of Business Information Systems, 2019 Vol.32 No.4, pp.522 - 535

Received: 08 Feb 2017
Accepted: 24 Feb 2018
Published online: 29 Nov 2019 *

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