Questions tagged [beta]
The beta tag has no usage guidance.
174
questions
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45 views
How do you hedge a portfolio against a factor using index Futures?
How do you hedge a portfolio against a factor using index Futures?
I constructed a long/short portfolio and dynamically hedge against an index, beta hedge.
I realized that my portfolio is highly ...
0
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0answers
25 views
Does it make sense to only interpret one side of dual beta?
Assume we separate return pairs in this way (one bucket for return pairs where excess benchmark return > average benchmark excess return, and another bucket for returns pairs where excess benchmark ...
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0answers
39 views
What details must be considered when assessing an asset’s inflation beta?
The inflation beta of an asset is described as:
$$ r_{i,t}-r_f = \alpha_i + \beta_\pi^i \epsilon_{\pi, t} + u_{i,t} $$
For shorthand, I will use “return” to mean excess return.
In academic literature ...
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0answers
58 views
Upside and downside beta?
Assuming we are talking about the dual-beta idea where we restrict benchmark returns to negative (downside beta) and positive (upside beta), then I have the following confusions.
Do we only interpret ...
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0answers
26 views
Interpret interaction term between dummy and continues variable /bank risk (Beta and stock return)
I am using OLS regression to answer my research question.Well, I have two types of banks( Commercial banks and bank holding company's).My dependent variable is banks stock return in the first quarter ...
2
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0answers
65 views
Why does Beta of a stock not correlate well with market sell off
I posted a question a few days back:
(Quantatively identifying stocks to short when overall market starts to roll-over)
@rubikscube09 suggested that stock beta ...
0
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2answers
101 views
Beta using only price returns?
It is my understanding that one can use both excess returns and price returns to compute a beta coefficient. In the former way, beta would be interpreted in the standard way (a 1 unit change in market ...
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0answers
30 views
In-sample forecast accuracy of Beta (Kalman filter) CAPM
One can calculate time-varying betas (known from the CAPM) using the Kalman filter.
For example, one can calculate the in-sample forecast accuracy using the MAE.
$MAE = \frac{1}{T}\sum_{t=1}^T|\hat{R}...
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1answer
157 views
How to get the weights for a beta neutral portfolio?
Given a ranking of 100 long stocks and 100 short stocks. Looking at these 200 betas: How can I find the optimal weights to get a beta = 0 long/short portfolio?
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57 views
Compare rich / cheap options on 2 underlyings
this question can turn out to be very basic but its something that has been bugging me.
Say I want to buy/sell an option on A vs sell/buy an option on B.
Facts I know
A and B are different ...
0
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1answer
186 views
What is the relation between "Capital Market Line" and "Capital Asset Pricing Model (CAPM)"?
I asked this question on Personal Finance and Money but since I don't know where to place it I placed it here also.
On the Coursera course Portfolio and Risk Management, on Week 2, I am having trouble ...
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1answer
43 views
Hedge 3 securities against 3 other securities
I have a portfolio of 6 securities, 3 long 3 short. I need to hedge them against each other so directional exposure = 0. How would I decide how to weight each security?
Is there a model to do this?
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39 views
Real estate returns with incomplete dataset?
I have a dataset of real estate returns in markets A, B, and C. I also have national returns, denoted market N. I have 10 columns representing the time period for each data point. Market A only has ...
0
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1answer
126 views
Understanding Look Back Period
When people say look back period of 6 months, how does that data look like? Are that 6 months of raw data or a weighted average of that data? I am a little confused on how you come up with beta values ...
2
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0answers
68 views
Portfolios sorted by TED volatility
I was reading a paper titled "Betting against Beta" (link). The paper has five major propositions. The fourth proposition is that betas are compressed towards one when funding liquidity risk ...
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0answers
24 views
Checking Regression Inputs & Outputs (Factor Regression)
I am looking to check the assumptions and interpretation of the output of a regression that I have run for factor exposures in a long/short equity portfolio:
Portfolio is long/short equity with a net ...
0
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1answer
86 views
Time horizon of estimation period CAPM beta
When calculating CAPM beta, it is done by rolling regressions. If it is only the beta we want to obtain, am I correct to assume that we can estimate rolling correlations and stds, and use this to ...
1
vote
1answer
87 views
High Beta, low specific risk, and no leverage?
My risk model shows a Beta of 2 for the stock APTIV (maker of car components). The model looks at the past 3 years with no decay.
Total vol is high but specific vol is very low. Typically when this ...
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0answers
160 views
Daily weights and returns of portfolio that rebalances monthly
I am to replicate the Betting against beta strategy by Pedersen and Frazzini. We use daily returns of the stocks and construct two portfolios based on their ranked betas. Weights is also based on the ...
2
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1answer
104 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
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0answers
41 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.
...
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2answers
105 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?
$$σ_i^2 = β_i^2 ...
-1
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1answer
169 views
Yahoo Finance Beta Calculation - foreign stock [closed]
How does Yahoo Finance calculate Beta for stocks quotes in foreign markets? Does it consider the volatility against local markets indexes or US S&P 500?
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0answers
67 views
How does Bloomberg calculate beta?
I tried manually calculating Bloomberg's historical beta based on the historical spread of SPY and equity price data, but I couldn't get the same result. I read somewhere that Bloomberg's default ...
1
vote
1answer
274 views
Relationship between Beta and implied volatility
Is there any way to make use of the Beta of an underlying and index, and the implied volatility of options on that underlying and the index?
To specify, if we have available the implied volatility of ...
0
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2answers
57 views
Should diverging valuation multiples affect beta estimate?
Suppose we experience a significant equity market crash. All equities are affected, but the drawdown disproportionately affects equities in a specific sector - for example, say the broad equity market ...
0
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1answer
153 views
Arbitrage in a Single Index Model
Simple question really, but I'm very confused by the starting point. Let's assume that we have a portfolio whose excess returns can be described by the following equation from the single index model:
...
0
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2answers
728 views
How can beta be negative? [closed]
I've been reading about the security market line and the definition of beta as
$$\beta_i = \frac{Cov(R_i, R_m)}{Var(R_m)} $$
for any asset (doesn't have to be an efficient portfolio), and have read ...
3
votes
2answers
249 views
Why Index Futures can be used as a Market benchmark?
I heard that we can use, say, Eurostoxx Futures as a benchmark to compute the beta of the index's components. Is this relevant? If so, how do we deal with the futures' expiry?
Thanks
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0answers
679 views
Beta Adjusted Return
I'm a bit confused about the definition of the 'Beta Adjusted Return', say I have benchmark whose return is $r$ and a stock whose return is $R$, the beta adjusted return is defined as
$$ ...
2
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0answers
49 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
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1answer
273 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 ...
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1answer
45 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
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1answer
153 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 ...
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3answers
527 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 ...
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0answers
243 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
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1answer
127 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
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1answer
74 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
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1answer
49 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 ...
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2answers
990 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-...
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0answers
59 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
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3answers
131 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 ...
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0answers
142 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\...
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2answers
125 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
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0answers
371 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 ...
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0answers
85 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 ...
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2answers
192 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 ...
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2answers
66 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
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1answer
478 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
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1answer
122 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 ...
