Market-based beta forecasts are based upon market information alone. Historical betas of firms are used as a proxy for their futures betas. This implies that the unadjusted sample beta, ^bt, is equal to the population value of future beta: btþ1 ¼ ^bt: Alternatively, there may be a systematic relationship between the estimated betas for the first period and those of the second period, as shown by Blume (1971): ^bi,tþ1 ¼ a0 þ a1 ^bi,t; in which ^bi,tþ1 and ^bi,t estimated beta for the ith firm in period t þ 1 and t, respectively.