New answers tagged beta
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The keyword here is directional exposure. You first need to define what is the instrument that you do not want to have directional exposure to. Oftenwise in case of equities, this might be an equity index.
Then you would need to estimate the betas of each security against the index and set the weights in any such way that the sumproduct of all the securities'...
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Every day (or every week) you compute a new Beta using the daily returns for the last 6 months. The 6 months keep being shifted forward (by 1 day, or 1 week, etc.) and that is what the word "rolling" indicates. "Lookback" refers to the length of past data used. The data for successive Beta estimates largely overlap, so the Beta estimates ...
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