Questions tagged [beta]
The beta tag has no usage guidance.
123
questions
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52 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
169 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
77 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 ...
1
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0answers
33 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 ...
1
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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 ...
1
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2answers
65 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
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1answer
54 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
1
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2answers
100 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
vote
2answers
86 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
125 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
vote
1answer
123 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/...
0
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1answer
41 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
vote
1answer
62 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
143 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
vote
2answers
55 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
118 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
45 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
104 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)$$
Now, what does leveraging $P$ have to do with $\beta$? How it is affected if we leverage ...
1
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2answers
175 views
Zero Beta Portfolio in R
I am trying to solve the zero portfolio problem in R.
Given n assets, the objective function is to minimize the variance of the portfolio
$$Min_x\;\; \frac{1}{2}x^T\Sigma x$$
subject to
$$COV\left(x^...
4
votes
1answer
343 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
406 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
155 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
97 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
126 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 ...
-1
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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.
0
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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 ...
1
vote
1answer
160 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 ...
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
309 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
73 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
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
votes
1answer
219 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 ...
-1
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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 ...
1
vote
2answers
492 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)
...
7
votes
1answer
313 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 ...
0
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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 ...
0
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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%...
0
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1answer
402 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
votes
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 $Var_1$, $Var_2$, ...
1
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1answer
955 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
80 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}}{...
0
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2answers
485 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 ...
-1
votes
1answer
148 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 ...
