The stock beta coefficient literature extensively discusses the proper methods for the estimation of beta as well as … its use in asset valuation. However, there are fewer references with respect to the appropriate time horizon that … investors should utilize when evaluating the risk-return relationship of a stock. We examine the appropriate time horizon for …

We derive a nonparametric test for constant (continuous) beta over a fixed interval of time. Continuous beta is defined … all the observations within the time interval under the null hypothesis that beta is constant. Using it we form an … shrinking time span. Optimality of the test is considered as well. We document satisfactory finite sample properties of the test …