YAHOO! FINANCE VS. BLOOMBERG BETA ESTIMATES: WHICH BETTER PREDICTS FUTURE RETURNS?

Carina N. Madoni, Ernst & Young LLP, Chicago, Illinois, U.S.A.
Julie A.B. Cagle, Xavier University, Cincinnati, Ohio, U.S.A.
R. Brian Balyeat, Xavier University, Cincinnati, Ohio, U.S.A.

Published in

JOURNAL OF INTERNATIONAL FINANCE AND ECONOMICS
Volume 18, Issue 4, p19-28, December 2018

ABSTRACT

The CAPM is arguable the most important and used equation in all of finance. The CAPM is used to calculate the required return for capital budgeting applications and as a benchmark return for investment decisions. The key input in the CAPM equation is the estimated beta. Research shows that rather perform the calculation themselves, many practitioners use a public source for their betas. This paper looks at two sources for betas: Yahoo! Finance and Bloomberg. Betas from Yahoo! Finance are publically available for free, but Bloomberg betas require a subscription. The results show that while the beta estimates from Bloomberg and Yahoo! Finance are statistically different, neither beta source consistently does a better job predicting future returns via the CAPM.

Keywords

CAPM, predicted returns, beta estimation


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