Questions tagged [beta]

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1answer
41 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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43 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 ...
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0answers
57 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
186 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\...
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1answer
81 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
34 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 ...
4
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1answer
99 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
30 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
70 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
55 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
102 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
101 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 ...
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2answers
142 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 ...
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1answer
241 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
44 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
42 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
73 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
151 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 ...
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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 ...
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2answers
57 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
131 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
46 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 ...
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1answer
106 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
181 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^...
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1answer
411 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
418 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
160 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
120 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 ...
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0answers
129 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
50 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
174 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
95 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
319 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 ...
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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
75 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
38 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
247 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
67 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
524 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
350 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
82 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
418 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
170 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 $Var_1$, $Var_2$, ...
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1answer
1k 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 ...
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1answer
82 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}}{...