# Questions tagged [beta]

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### 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 ...
0answers
269 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 ...
0answers
283 views

### Good criteria to sort state-space $\beta_{t}$ according to Kalman filter output

Let's assume the usual state-space linear model without constant term for simplicity: $y_{t}=\beta_{t} X_{t}+\epsilon_{t}$ If we apply Gaussian Kalman filter to estimate $\beta_{t}$ we get $P_{t}$, ...
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40 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. ...
0answers
43 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? ...
1answer
80 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 ...
0answers
57 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 ...
0answers
158 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 ...
0answers
41 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 ...
0answers
135 views

### Best method for determining the market value of a stock before it is issued

I am attempting to determine the hypothetical market value of a stock for a company emerging from bankruptcy as of a date prior to actual the issuance of the stock. For example, let's say the formerly ...
0answers
15 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 ...
1answer
37 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 ...
0answers
153 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 ...
2answers
645 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-...
0answers
66 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 ...
0answers
49 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 ...
0answers
42 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 ...
0answers
51 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/...
0answers
197 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 ...
0answers
100 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 ...
0answers
132 views

### Levered beta with changing equity/debt ratios

I know how to calculate a bottom up levered beta for a privately held and not publicly traded company with Hamada (Proof of Hamada's Formula (Relationship between levered and unlevered beta)) and ...
0answers
285 views

### Generalized method of moments concept in CAPM testing

In the course of my master thesis I’ve come across a paper by Carr and Wu (2009) where the authors evaluate whether returns on variance swaps can be explained by the simple CAPM. (really only market ...
0answers
925 views

### How to calculate beta against a multi-asset benchmark

Lets say that I have a benchmark, $BM$ that consists of 3 assets- 30% asset $A$, 30% asset $B$ and 40% asset $C$. Now, lets further assume I am trying to construct a portfolio that uses $BM$ as its ...
0answers
133 views

### Confused on interpretation of betas/alphas in regression in finance

I ran a regression on two stocks. I don't have the data in front of me, but it is a more conceptual question. Let's say SP500 returned a total 23% return over this time period and MSFT returned 9%...
0answers
1k views

### Downloading Quotes in CSV format from Yahoo Finance - Beta symbol?

By using http://finance.yahoo.com/d/quotes.csv?s=STOCKNAME&f=I am able to download a CSV file, does anyone know what the symbol for beta is? It should go after <...
0answers
22 views

### Testing alternative null hypothesis in simple linear model? - R

This might be a rookie question, but how does one test for H0 = 1 instead of H0 = 0 using the LM() function? My use case is to test whether beta is significantly different from 1 in a CAPM model in R. ...
0answers
66 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 ...
0answers
24 views

### Difference between alpha and ROI ratios?

Given the intuitive definition of "alpha" as the percentage advantage of a portfolio over its benchmark market, what is the difference between ratio (%) of ROIs and alpha? What I mean by &...
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52 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 ...
1answer
95 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: ...
0answers
71 views

### BEKK Garch for time-varying beta in python

I am currently trying to analyse stocks of the S&P500 for their time-varying beta using BEKK Garch in python(jupyter). Unfortunately, I can't find any good packages and the documentation for bekk ...
0answers
358 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  ...
0answers
44 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, ...
3answers
113 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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105 views

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720 views

### what is a reasonable beta in CAPM?

I want to predict expected returns for assets using a CAPM, to calculate unexpected (unpredictable, idiosyncratic, non-systemic) returns in portfolios. My CAPM estimated on monthly total gross ...
1answer
181 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 ...