Questions tagged [beta]

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47 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 ...
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0answers
8 views

Is there any source where I can find historical data OR beta for Indian stocks based on their ISIN numbers? [duplicate]

I need a source that provides beta or historical data (through which I can calculate beta) for Indian stocks based on their ISIN numbers, having an API or csv deployment devices
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2answers
91 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 ...
1
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2answers
81 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
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1answer
94 views

Best practice approach for computing beta

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
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1answer
52 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 ...
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0answers
43 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
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1answer
40 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 ...
1
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1answer
56 views

Calculating beta when holding market portfolio

Suppose that CAPM holds and that you hold a portfolio of the market portfolio and the risk-free asset with weights equal to 0.74 and 0.26 respectively. What is the beta of your portfolio? My ...
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1answer
136 views

Calculating idiosyncratic risk of stock without beta or risk free rate

I have been given the expected returns and standard deviations of 2 stocks A and B, as well as the standard deviation of the market portfolio and correlation between security A and the market ...
0
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1answer
78 views

How to apply derived beta to daily change?

I've taken three months of price return data for two instruments and calculated a $\beta$ between the two using the formula $\beta = \frac{Cov(x,y}{Var(y)}$ with the goal of estimating what the ...
1
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1answer
47 views

if the​ risk-free interest rate​ increases, and nothing else changes, is the market portfolio still efficient?

I think the response is no but I don't know why If so, Stocks with betas greater than one will be buying opportunities and stocks with betas less than one will be selling opportunities because I can ...
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2answers
109 views

Why we can't lower a volatility of a portfolio (without changing expected return) by substituting a zero beta stock with a risk free asset?

part of the answer is that a zero-beta stock must be negatively correlated with other stocks in the portfolio. So having a zero beta stock can decrease the volatility. Does that mean that the ...
2
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0answers
44 views

The utility function in Betting Against Beta

http://pages.stern.nyu.edu/~lpederse/papers/BettingAgainstBeta.pdf Betting Against Beta strategy is presented in the link above. Most of the theory and derivation is based on a utility function given ...
2
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1answer
101 views

What does leverage have to do with beta? [closed]

Given a portfolio $P$ with return $R$ and market-beta $\beta$, we have $$E (R - R_f) = \beta (E R_M - R_f)$$ Now, what does leveraging $P$ have to do with $\beta$? How it is affected if we leverage ...
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2answers
169 views

Zero Beta Portfolio in R

I am trying to solve the zero portfolio problem in R. Given n assets, the objective function is to minimize the variance of the portfolio $$Min_x\;\; \frac{1}{2}x^T\Sigma x$$ subject to $$COV\left(x^...
4
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1answer
289 views

What is the industry standard way of calculating and annualizing performance metrics?

Say I am looking at a performance report for a hedge fund manager who trades mostly equities, and they provide me a list of monthly returns for the past 5 years. What is the industry standard way to ...
2
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1answer
397 views

Calculating beta to market

Let's say we want to compute beta to S&P500 of a portfolio, using 3 years of weekly returns, as of today. We would take each stock in the portfolio and regress the weekly returns of that stock ...
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0answers
146 views

SPX/VIX Implied Beta Calculation

In https://globalmarkets.bnpparibas.com/r/Volatility_Express_20171128.pdf?t=BG3REXwMP3NZJRN7wY5Vt&stream=true, it states that 3M VIX/SPX implied Beta = (VIX 3M IVOL*VIX 3M futures)/SPX 3M IVOL ...
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1answer
93 views

In the “betting against beta” paper, what exactly is the “BAB factor”?

I refer here to the paper "Betting against beta" by Pedersen and Frazini. In the model, they construct the following factor, on page 5. I don't quite understand how this portfolio is being ...
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2answers
900 views

Efficient algorithm for calculating Beta coefficient

I'm using Python/Pandas. Using naive nested for-loops to do Beta calculation for all ~5k stocks by ~5k days (moving window ~250 days) is unbearably slow. Is there any fast and elegant way to ...
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0answers
118 views

How to verify if beta “works” for hedging?

Suppose you want to calculate the beta of a stock to an index using weekly returns. If the stock is sufficiently volatile, and you use few enough observations, it is possible that the absolute value ...
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1answer
49 views

How to find beta from the information given? [closed]

This is an exam question. I know that to find beta I need the covariance between the portfolio and asset A but don't know how to find it.
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1answer
55 views

[Notation Query ]Expressing matrix as summation over product of vectors (Coefficient of Regression)

The coefficient of regression $\beta$ is often expressed as: $\beta = (X^TX)^{-1}X^Ty$ I came across the notation below. Can someone help me visualize how the summation of column vectors $x_i$ is ...
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1answer
150 views

Period length and maximum data points on estimating the 5-year Beta-factor

I currently read chapter 8 Beta from Bali, Engle and Murray's book Empirical Asset Pricing: The Cross Section of Stock Returns and do not understand their estimation on the five-year Beta-factor (...
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0answers
93 views

Beta of options based strategy

This is probably a simple/dumb question, but I am not getting it. As per GMO's recent Insight: Second, as can be inferred from Exhibit 1, put writing strategies have a low beta to the equity ...
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0answers
1k views

Creating Factor mimicking portfolio returns

I have some trouble understanding how to create factor mimicking portfolio returns. As pointed out in this question, Tsay provides a small description, but I am unsure if my procedure is correct. In ...
5
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1answer
303 views

Simple mean reversion strategy portfolio construction

I had a quick idea I wanted to test, but am not sure of the correct way to size bets. Basically, I think that for a given index (say S&P), I want to be long under performers and short over ...
2
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0answers
39 views

If beta is used by all investors consistently, can it become more efficient to measure risk?

Let's say that today beta only accounts for 8% of the stock's variability, i.e. its R squared is 0.08. If investors use beta to determine discount rates and calculate NPV, etc., can this 8% increase ...
2
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1answer
72 views

How to Deal With Betas when variance is Zero?

To calculate a beta, I was using the following formula(Considering $ra$ as returns of $a$ and $rb$ as returns of $b$): $$ \beta = { cov(ra, rb) \over var(rb)} $$ As a software developer, I ...
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1answer
36 views

Portfolio return through beta [closed]

Considering the beta value of the three assets in my portfolio simulation and the weights of the assets, i have computed the beta of the portfolio itself. How can i calculate the expected return of ...
3
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1answer
203 views

Trying to replicate the Beta of Yahoo in R but am getting an answer that is way off

Yahoo calculates the Beta by using 3 years of monthly returns and using the S&P 500 as a market proxy but I cannot seem to replicate this or even get close using R. I downloaded the data from ...
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1answer
66 views

Multi-Factor Beta Help

I'm supposed to find a risk factor that could explain a stock (I chose Netflix) returns. Then, I am to calculate the beta with respect to the factor I suggested as part of a multi-factor model with ...
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2answers
464 views

Beta in foreign exchange market

Would it make sense to use a regression to calculate beta for returns on a foreign exchange currency (regressed on a market average of all currencies)? Would the beta make sense? (why/why not) ...
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1answer
289 views

How high can Beta be in CAPM?

I recently got an interview question for a junior analyst role asking if risk could be infinite in CAPM, and I wasn't sure how to answer it. I don't see how an asset could be infinitely more volatile ...
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1answer
3k views

How can I calculate Fama-French Beta, RMW and CMA factor for a particular stock?

I already have a method of calculating Size: the natural logarithm of the market value of equity at the end of the fiscal year. But how to account for the Market Risk Premium, RMW, CMA and MOM ...
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1answer
79 views

Converting international equity returns to USD

Background: I am trying to replicate some results from the Betting Against Beta paper by Frazzini & Pedersen (FP). (http://www.econ.yale.edu/~af227/pdf/Betting%20Against%20Beta%20-%20Frazzini%...
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1answer
387 views

How do I calculate levered equity beta without unlevered equity beta? [closed]

I'm doing an assignment where I have liabilities including market and book values of long-term debt. I also have capital including common stock, paid in capital, and accumulated earnings. I've been ...
2
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1answer
169 views

Is this the correct way to hedge two securities against each other?

Let's say I believe that $ts_1$ and $ts_2$ move together and I would like to pairs trade them. Am I correct in understanding that to hedge them against each other I would get their $Var_1$, $Var_2$, ...
1
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1answer
914 views

How to “Standard Beta Hedge”?

Let's say I have 2 time-series, how would I "standard beta hedge" them against each other? For example, what if the position in 1 timeseries is 100 shares at 16 USD per share. Another time-series is ...
0
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1answer
78 views

Two definitions of Beta

I have seen two definitions of Beta one is $$\beta = \rho\dfrac{\sigma_{asset}}{\sigma_{market}}$$ Here $\rho$ is the correlated coeffient another one is $$\beta = \dfrac{r_{expect} - r_{risk\ free}}{...
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2answers
474 views

What is the best benchmark index for computing the beta of a multinational company?

I'm running a valuation of a multinational company listed on the AEX (Amsterdam Eurononext). The company has operations in Europe (70%), US (25%) and other (5%). I have historic stock data until from ...
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1answer
147 views

Finance beta: normally distributed?

If we assume normally distributed return (or normally distributed log Returns) for an asset and the market, can be then also say that the betas derived by this are also normally distributed? How ...
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1answer
2k views

What is the Beta of an efficient portfolio?

I'm beginning to learn Portfolio Theory and I want to understand the Beta and its value for efficient portfolios. An efficient portfolio is the one that gives the best expected return for an ...
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1answer
1k views

Historical beta: Beta estimation for which time horizon?

In practice historical beta is the most used approach for calculating beta. Some one can use i.e. the last 6 month daily returns of stock i and market m to calculcate this. Nevertheless I am ...
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1answer
494 views

Low beta and high correlation

Assuming that time period used to calculate the beta and correlation between an index and an asset is the same, is it possible to observe low beta while having high correlation? If yes, how would ...
1
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1answer
217 views

How reliable is beta as a measure of risk when investing lwith a long horizon

Beta is the correlation of a company's stock price to that of the overall market. As such it gives insight in how volatile a stock's price has been in reltation to the market, thus, how risky the ...
2
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1answer
2k views

Creating a Beta-Neutral Portfolio

Given a portfolio of assets (say 10) and trading signal (1=Hold): ...
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2answers
259 views

Interpretation of Excess Return

How is excess return defined for a given asset? There are altogether two different definitions for excess return used in the calculation of alpha and beta and I'm unable to understand which one ...
0
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1answer
593 views

Can the net portfolio's beta be different from the sum of long and short betas of the portfolio?

The way I calculate it is summing up the weighted beta of long and shorts but I saw a table where this wasn't the case so I am wondering if this is not the correct way.