Simply Better Market Betas

This paper introduces a robust and easy-to-implement one-pass market-beta estimator. It only requires first winsorizing daily stock rates of return at -2 and +4 times the contemporaneous market rate of return. In predicting future market-betas, this "slope-winsorized" beta estimator predicts future betas better not only than OLS betas, Bloomberg betas (ubiquitous on financial websites), and Vasicek (1973) betas, but also published estimators that require intra-day data, super-computers, or financial statements. Moreover, using weighted-least squares to exponentially decay the weight of aged return observations (with a half-life of about four months) further improves the estimates.