Beta Instability of Firms: The Case of the Taiwan Stock Market During Its Financial Development

Abstract

In this paper, we find evidence of the intra- and inter-period beta instability of firms in the Taiwan stock market during its financial development from 1982 to 1998. Particularly noteworthy is the result that the proportions of firms exhibiting beta instability, in the full sample and two well-known export-oriented industries, the textile and the electronics industries, are lower in the sub-period January 1987-December 1992 than in the other two sub-periods, January 1982- December 1986 and January 1993-December 1998. The result may be attributable to non-fundamental-driven optimism or pessimism about the market induced by speculative capital flows during the sub-period January 1987- December 1992.