publication . Article . 1995

Measuring Systematic Risk Using Implicit Beta

Andrew F. Siegel;
Open Access
  • Published: 01 Jan 1995 Journal: Management Science, volume 41, pages 124-128 (issn: 0025-1909, eissn: 1526-5501, Copyright policy)
  • Publisher: Institute for Operations Research and the Management Sciences (INFORMS)
A new technology is proposed for estimating the systematic (beta) risk of a firm's stock. Just as the implicit volatility of an asset is revealed by an ordinary call option, the "implicit beta" of a stock would be revealed by the price of an option to exchange shares of stock for shares of a market index. Considerable benefits would accrue to those involved with the theory and practice of finance, if and when these exchange options begin trading, due to the availability of instantaneous, up-to-the-minute, precise indicators of firms' systematic risk levels.
Persistent Identifiers
free text keywords: Management Science and Operations Research, Strategy and Management, exchange option, volatility and return in financial markets, capital asset pricing model, Economics, Non-qualified stock option, Stock market index, Capital asset pricing model, Volatility (finance), Systematic risk, Stock dilution, Financial economics, Call option, Financial market
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