Questions tagged [beta]
The beta tag has no usage guidance.
133
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calculating 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
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2answers
90 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 ...
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35 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 $\beta_{M}=0.8$, $\beta_{SMB}=0.4$,...
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0answers
26 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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0answers
25 views
variation in portfolio vs systematic risk
I am currently studying about 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 ...
1
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0answers
21 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
48 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
63 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 ...
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0answers
44 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
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0answers
61 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
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2answers
189 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
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1answer
93 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 ...
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0answers
44 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
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1answer
140 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 ...
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0answers
35 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 ...
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2answers
77 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)
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1answer
58 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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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
105 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
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2answers
123 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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2answers
173 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
428 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
45 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/...
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1answer
50 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
76 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 ...
0
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1answer
168 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
88 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 ...
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2answers
64 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 ...
0
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2answers
153 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
47 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
110 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)$$
Now, what does leveraging $P$ have to do with $\beta$? How it is affected if we leverage ...
1
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2answers
194 views
Zero Beta Portfolio in R
I am trying to solve the zero portfolio problem in R.
Given n assets, the objective function is to minimize the variance of the portfolio
$$Min_x\;\; \frac{1}{2}x^T\Sigma x$$
subject to
$$COV\left(x^...
4
votes
1answer
648 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
427 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
169 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
...
2
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1answer
144 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
1k 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 ...
2
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0answers
136 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
53 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
56 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 ...
1
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1answer
188 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
99 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 ...
4
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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
votes
1answer
338 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
votes
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
votes
1answer
83 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 ...
0
votes
1answer
41 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 ...
5
votes
1answer
6k views
Marginal Risk Contribution Formula
I am trying to understand and implement the standard 'marginal risk contribution' approach to portfolio risk and hoping to reconcile the formulae provided for its calculation in different sources. ...
3
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1answer
261 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
68 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 ...
