TY - JOUR T1 - Evaluating the Accuracy of Beta Forecasts JF - The Journal of Portfolio Management SP - 84 LP - 93 DO - 10.3905/jpm.2016.42.3.084 VL - 42 IS - 3 AU - Jose G. Menchero AU - Zoltan Nagy AU - Ashutosh Singh Y1 - 2016/04/30 UR - https://pm-research.com/content/42/3/84.abstract N2 - The authors present a methodology to compare the accuracy of beta forecasts. They show that residual volatility is minimized when true (unobservable) betas are used. The authors relate the level of error in the beta estimate to the realized residual volatilities and then use their approach to compare the accuracy of several beta estimates. In particular, they find that the predicted betas from a factor risk model are significantly more accurate than the historical betas derived from a time-series regression.TOPICS: Analysis of individual factors/risk premia, factor-based models, volatility measures ER -