I hedge a portfolio of Global Equities (200 stocks within MSCI World universe) by shorting futures on MSCI World Net Total Return. The hedge is calculated using Beta. Beta is calculated using a risk model looking at historical volatility for the past year.
When there is no market crash, volatility is relatively low and my portfolio Beta to benchmark (to MSCI world) will be say 1. Turns out that during a market crash the observed Beta was like 1.2, so the hedge underperformed (not all of the losses were mitigated).
I am concerned that the model will now take this volatility into account and this will make Beta increase. This means that I will short more futures, and if the market goes up in a less volatile way, I could lose more on the way up.
What's the market practice to avoid this issue?