Questions tagged [beta]
The beta tag has no usage guidance.
147
questions
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17 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
30 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
31 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
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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
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1answer
45 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
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3answers
136 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
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0answers
49 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
45 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
27 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
38 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
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2answers
118 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
32 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
71 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
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0answers
29 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
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0answers
57 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
94 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 ...
0
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0answers
36 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
33 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
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2answers
70 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
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1answer
37 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
56 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
83 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 ...
1
vote
1answer
61 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
64 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
216 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
99 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
46 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
164 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
38 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
90 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)
2
votes
1answer
64 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 ...
0
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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
129 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
138 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
266 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
685 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
48 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
66 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 ...
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1answer
84 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
195 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
94 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
84 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
votes
2answers
201 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 ...
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0answers
49 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
votes
1answer
117 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
vote
2answers
203 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
941 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
votes
1answer
437 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
177 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
221 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 ...
