Questions tagged [beta]
The beta tag has no usage guidance.
159
questions
2
votes
1answer
70 views
Build a portfolio with $\beta=1$ and minimize $\sigma^2$ using CAPM
Suppose there are two stocks A and B:
expected returns are $E[R_A]=0.1$, $E[R_B]=0.15$;
standard deviations are $\sigma_A=0.1$, $\sigma_A=0.2$;
correlation is $corr(A,B)=0.6$;
their betas to some ...
2
votes
0answers
36 views
% of allocation in a portfolio based on beta
Just an amateur investor hoping to minimise loss by using beta for portfolio allocation.
Tried using individual beta/summed beta but that would result in a higher allocation for the highest beta.
...
0
votes
2answers
98 views
Nonsystematic risk in a random rate of return [closed]
Good evening,
I am studying the CAPM and I have a doubt regarding the variance $σ_i^2$ of the expected return of an asset $i$.
In particular, how can I derive the following formula?
$$σ_i^2 = β_i^2 ...
0
votes
0answers
21 views
Difference between alpha and ROI ratios?
Given the intuitive definition of "alpha" as the percentage advantage of a portfolio over its benchmark market, what is the difference between ratio (%) of ROIs and alpha?
What I mean by &...
-1
votes
1answer
69 views
Yahoo Finance Beta Calculation - foreign stock [closed]
How does Yahoo Finance calculate Beta for stocks quotes in foreign markets? Does it consider the volatility against local markets indexes or US S&P 500?
1
vote
0answers
39 views
How does Bloomberg calculate beta?
I tried manually calculating Bloomberg's historical beta based on the historical spread of SPY and equity price data, but I couldn't get the same result. I read somewhere that Bloomberg's default ...
1
vote
1answer
99 views
Relationship between Beta and implied volatility
Is there any way to make use of the Beta of an underlying and index, and the implied volatility of options on that underlying and the index?
To specify, if we have available the implied volatility of ...
0
votes
2answers
26 views
Should diverging valuation multiples affect beta estimate?
Suppose we experience a significant equity market crash. All equities are affected, but the drawdown disproportionately affects equities in a specific sector - for example, say the broad equity market ...
0
votes
0answers
51 views
Arbitrage in a Single Index Model
Simple question really, but I'm very confused by the starting point. Let's assume that we have a portfolio whose excess returns can be described by the following equation from the single index model:
...
0
votes
2answers
210 views
How can beta be negative? [closed]
I've been reading about the security market line and the definition of beta as
$$\beta_i = \frac{Cov(R_i, R_m)}{Var(R_m)} $$
for any asset (doesn't have to be an efficient portfolio), and have read ...
3
votes
2answers
230 views
Why Index Futures can be used as a Market benchmark?
I heard that we can use, say, Eurostoxx Futures as a benchmark to compute the beta of the index's components. Is this relevant? If so, how do we deal with the futures' expiry?
Thanks
0
votes
0answers
35 views
BEKK Garch for time-varying beta in python
I am currently trying to analyse stocks of the S&P500 for their time-varying beta using BEKK Garch in python(jupyter).
Unfortunately, I can't find any good packages and the documentation for bekk ...
0
votes
0answers
183 views
Beta Adjusted Return
I'm a bit confused about the definition of the 'Beta Adjusted Return', say I have benchmark whose return is $r$ and a stock whose return is $R$, the beta adjusted return is defined as
$$ ...
2
votes
0answers
40 views
Why is the efficient portfolio assumption necessary for the CAPM model?
One of the main assumption in the CAPM model is that all the investors are rational and they hold the most efficient portfolio for a given level of risk. What difference does this assumption make? ...
0
votes
1answer
99 views
What is the intuition of CAPM model with Intercept at 0?
I only have a very general theory-based knowledge on Jensen's Alpha. I'm very curious about Capital Asset Pricing Model with intercept at 0. May I know what is the intuition behind this? What does it ...
-1
votes
1answer
41 views
How to build a portfolio following the Smart beta process by dividend? [closed]
I'm having trouble finding the method to track smart beta dividend management. I have an Excel file which contains the prices and the dividends of certain companies, and I want to build a portfolio ...
0
votes
1answer
71 views
Beta and standard deviation
IS beta of a stock formula equals to correlation coefficient multiply with annualized standard deviation of stock A divide annualized standard deviation of market . i am not sure whether to use ...
1
vote
3answers
228 views
CAPM and Beta: problem with regression (Beta is too low yet statistically significant?)
I have two time series of daily return calculated as $\frac{Price_{t}}{Price_{t-1}} -1$. One is the daily returns of a portfolio, the other the daily returns of the index (MSCI World). Period is 2020 ...
1
vote
0answers
83 views
covariance matrix in the CAPM model
I'm running a simulation for a 5 asset portfolio, calculating the optimal weights of each asset both with the statistical model (i.e. single index) and with the CAPM. my question is: how do you ...
0
votes
1answer
56 views
relationship between the expected rate of return and the value measured by the beta factor
Assume that only two companies are listed on an effective capital market:
companies A and company B. Capitalization (market value of all shares) of both companies is the same. Expected rate of return ...
0
votes
1answer
40 views
Beta of sum or sum of betas
When interested in the beta of a portfolio, I see people make a weighted sum of the portfolio components' betas. Intuitively, I would have calculated the beta of the portfolio based on its aggregate ...
0
votes
1answer
39 views
CAPM Model, is this exercise done correctly?
Hey i need to know if the task is done correctly, please help :) Standard deviation of the rate of return on the market portfolio is equal to $\sigma_{MP}=1,5\%=\frac{15}{1000}$. I have portoflio ...
0
votes
2answers
400 views
Hedge backtesting: ex-ante Beta vs observed Beta (is this even possible?)
A global equity portfolio has for objective to outperform a benchmark (MSCI World). I hedge the sensitivity of the portfolio to MSCI World (the beta) so that only the alpha remains unhedged.
The ex-...
0
votes
0answers
35 views
Performance attribution and monthly rebalance: Is a month enough data to calculate Beta and Alpha?
A portfolio is built systematically by calculating scores and rebalanced each month to invest only in the 80 best scores. Scores change frequently and therefore the portfolio changes each month, ...
0
votes
3answers
85 views
Hedge performance in times of volatility: Beta changes impacting PnL during market rebound
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 ...
0
votes
0answers
31 views
How does yahoo finance calculate Beta [duplicate]
When I calculate Beta indicator for FB relation to SPY, i.e BETA(SPY,10), I get other numbers than yahoo finance.
My calculation is COV(%change(FB),%change(SPY))/VAR(%change(SPY)) for 10 days.
Can ...
0
votes
0answers
71 views
Calculation of portfolio beta (CAPM)
Let the market risk be $\sigma_m=28\%$. A portfolio consists of four stocks, all with the same weight ($w_i=0.25$ for all $i$). We also know that $\sigma_a=18\%,\sigma_b=36\%,\sigma_c=22\%,\sigma_d=17\...
1
vote
2answers
97 views
Outperform the market with a Beta lower than 1, is it possible? [closed]
I have a portfolio which seems to have outperformed the benchmark for the past 2 years however the risk system I use advises that using recent past data (lookback period of 2 years) the Beta to this ...
3
votes
0answers
204 views
How to derive the CAPM from maximizing the Sharpe ratio?
I know how to derive at the CAPM from a microeconomic foundation. In a recent University course I stumbled over a slide that derived the CAPM solely from the Sharpe ratio:
I cant come up with that ...
0
votes
0answers
37 views
Benchmark for fund in Fama French 3 factor setting
I found this question during my preparation for an exam. It looks easy, but I am not quite sure how to answer it.
Consider a fund A with following factor exposures $\beta_{M}=0.8$, $\beta_{SMB}=0.4$,...
0
votes
0answers
55 views
How to interpret a value stock with 0 beta to HML portfolio
I am unsure of how to interpret stocks that have a low P/b but have a low beta when regressed onto the HML portfolio. Conversely, I have found stocks that are not cheap but have a high beta to HML ...
0
votes
2answers
90 views
Variation in portfolio vs systematic risk
I am currently studying the CAPM, and I stumbled upon something that I can see is different, but I can't make the distinction.
This isn't some mathematical question per se, but I hope that you maybe ...
1
vote
2answers
58 views
Asset risk relative to market portfolio risk - derivation problem
I am currently studying the CAPM, and at the moment I am focusing on beta.
I am using the following book:
Danthine, J-P and J. B. Donaldson (2014): Intermediate Financial Theory (3rd Edition)
http://...
0
votes
1answer
258 views
Multi Factor rolling beta
I want to monitor HF/CTA long/short position and calculate beta on different HF indices in Excel/VBA, see graph below. I can't seem to find any papers on "Multi-factor based rolling beta", so my ...
1
vote
1answer
93 views
What is market sensitivity and momentum sensitivity?
I have daily data of about 29 stock prices and 1 index prices of past 7 years
I calculated beta as the ratio of covariance(Rm,Ri) / variance(Rm)
I also calculated 200 days rolling momentum score as ...
2
votes
1answer
72 views
Question about CAPM Betas - Causes of Beta Movement Query
CAPM betas are measures of systematic risks, which include things like the exchange rate, inflation, interest rates, etc.
What I'm confused about is described below:
E.g. suppose I'm looking at one ...
1
vote
0answers
65 views
Why don't these betas match?
I am sure I am missing something simple, but I would expect my portfolio beta when regressed against the market to match my individual component betas multiplied by the portfolio weights. I have ...
4
votes
3answers
233 views
Definitions of Beta
Definition of Beta
It is generally understood that the beta of an asset $i$ is given by coefficient of the linear regression of the asset returns on market ($m$) returns, i.e.
$$\beta_i = \frac{\rho\...
2
votes
1answer
103 views
What is the effect of leverage (ability to short stocks) upon the Fama-French regression coefficients?
I have optimised a set of portfolio and subsequently regressed the returns against the fama-french-Carhart factors. I have two portfolio, one in which short sales are allowed (the portfolio can take ...
1
vote
0answers
48 views
How to make a portfolio neutral to a Fama-French factor?
I have quintiles of 58 companies each that I have performed a CAPM regression with. I now wish to try and make these quintile portfolios neutral to Fama-French factors and was hoping for some insight ...
5
votes
1answer
204 views
Questions about beta, correlation, and covariance
Currently, I calculate beta, correlation, and covariance measures using daily log normal returns of Security A and Benchmark A. What would it mean if I were to use daily log normal excess returns in ...
1
vote
0answers
39 views
Covariance time frequency
I have rolling 3-year returns for an asset and a benchmark.
I want to compare the covariance of the asset and benchmark, should I use the covariance of the rolling 3-year returns or the covariance ...
1
vote
2answers
113 views
Beta: Cumulative vs. Simple Returns
How would calculating Beta using cumulative returns differ from Beta calculated with monthly returns? Is one more appropriate to use than another?
https://en.wikipedia.org/wiki/Beta_(finance)
3
votes
1answer
114 views
Why is the CAPM Beta defined this way - Beta hedging
Let's say I have two equity indices X and Y. Assume they are negatively correlated with some leverage. I want to hedge X with Y.
I have seen many ways of computing a beta to describes the ...
1
vote
2answers
174 views
How to handle Holidays in Time-Series Datasets?
Im currently analyzing a Dataset of the German Stock market. While Holidays like Christmas or New Year aren't a problem for Return Calculation or Portfolio Performance, im testing some regressions and ...
2
votes
2answers
151 views
Estimated betas and optimal portfolio
I ran a regression on 20 assets to estimate their beta with different methods. I would like to see the differences of these estimation differences in terms of mean-variance optimal portfolio. How can ...
0
votes
2answers
324 views
Best practice when computing beta coefficient
I was wondering how one should choose parameters such as "frequency" of returns (daily, monthly etc.), "time frame" (1 or 3 or 5 years of historical data etc), benchmark (same of the portfolio or the ...
1
vote
1answer
1k views
Relationship between Tracking Error and Beta to benchmark
Analyzing an indexed portfolio, can we say there is any relationship between ex-ante TE and Beta to benchmark?
Tracking error is the volatility of the difference in returns between the portfolio and ...
1
vote
0answers
49 views
Constructing Portfolio Beta
Suppose I have a portfolio with securities with different history. Say some securities have 15-20 years of history and some are like Uber or Lyft, which has limited history. There are assets with 1/2/...
0
votes
1answer
85 views
Is there a robust way to calculate stock beta or factor exposure that's specific to crashes?
Commonly known factors like market, value, momentum etc. have positive expected returns because they draw-down unexpectedly and investors require a risk premium for holding them. This idea is extended ...
