Simply Better Market Betas around the Globe

This paper compares the forecasting and hedging performance of 11 CAPM beta estimators across 54 international stock markets. The Welch (2022) age-decayed slope-winsorized beta estimator ranks first in predicting future realized OLS betas in 46 markets and is always within the top 3 performers. It also performs well in predicting future realizations of its competitors and goes head-to-head with the Levi and Welch (2017) double-shrinkage beta estimator in hedging market risk exposures. The slope winsorization method improves beta estimations in both developed and emerging markets. Yet, the monotonicity tests of beta-sorted portfolios reveal that all beta estimators fail to provide evidence supporting an increasing relation between betas and expected returns