Hi Team,
How to do adjustment in Beta due to beta drift? And what is this drift concept?
Thanks
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When you are to estimate beta, analyst tend to add a beta drift/adjustment called the blume adjustment. This takes what your “long term beta” would be, which is one, and your estimated beta and creates a some what of weighted average putting 2/3 of weight towards your estimated beta and 1/3 towards the long term beta.