portfolio beta

Portfolio beta

Used in the context of general equities. The beta of a portfolio is the weighted sum of the individual asset betas, According to the proportions of the investments in the portfolio. E.g., if 50% of the money is in stock A with a beta of 2.00, and 50% of the money is in stock B with a beta of 1.00,the portfolio beta is 1.50. Portfolio beta describes relative volatilityof an individual securities portfolio, taken as a whole, as measured by the individual stock betas of the securities making it up. A beta of 1.05 relative to the S&P 500 implies that if the S&P's excess return increases by 10% the portfolio is expected to increase by 10.5%.

Portfolio Beta

A measure of a portfolio's volatility. A beta of 1 means that the portfolio is neither more nor less volatile or risky than the wider market. A beta of more than 1 indicates greater volatility while a beta of less than 1 indicates less. Beta is an important component of the Capital Asset Pricing Model, which attempts to use volatility and risk to estimate expected returns.

portfolio beta

The relative volatility of returns earned from holding a specific portfolio of securities. A high portfolio beta indicates securities that tend to be more volatile in their price movements than the market taken as a whole. Portfolio beta is calculated by summing the products of each security's beta times the proportional weight of the security in the portfolio. For example, if a portfolio consists of two securities, one valued at $15,000 and having a beta of 0.9 and the other valued at $10,000 and having a beta of 1.5, the portfolio beta is (0.9)( $15,000/$25,000 ) + (1.5)( $10,000/$25,000 ), or 1.14.
References in periodicals archive ?
Table 5 presents the adopted risk criterion ([[alpha].sub.i]), portfolio beta, return results, standard deviation, [S.sub.R] obtained and number of assets that make up the portfolio for each optimized portfolio from information about the whole market.
It is important to note that all three portfolios presented similar levels of risk, measured by the daily standard deviation and the portfolio beta. This finding was not expected by the previous studies that claim that recognition heuristic strategies yield greater returns during bullish periods (Borges et al., 1999).
Equity hedge strategies had a net capital outflow as investors reduced portfolio beta and exposure to record equity markets.
Students should note the level of the portfolio beta and comment on any movement from the initial investment stage through each reporting period (every 2 weeks).
The average row of Panel B of Table 4 shows that the portfolio beta of each beta group averaged across the 5 different-sized portfolios steadily increases from 0.81 to 1.21.
For instance, Gompers and Lerner (1997) find a portfolio beta of 1.08.
Results of this study show that it is possible to minimize portfolio beta variability by selecting stocks which, individually, exhibit low to moderate beta variability.
According to the CAPM, the excess returns on any portfolio, and in particular the momentum portfolio I consider, should depend systematically only on the portfolio beta. To determine whether this condition is met, I run an OLS regression of the excess returns of the momentum portfolio on the excess returns on the market portfolio for the period January 1927 to December 2009.
We present the time-series averages of the slope coefficients from the cross-section of average portfolio returns on the conditional portfolio beta:
The result also suggests that market risk is directly related to asset size with the "large firm" portfolio beta being larger than those of "medium" and "small" firms and closer to unity.
Typically, the portfolio Beta is measured against the benchmark, so the benchmark should have a Beta of 1.0 and a resulting Treynor ratio of 8.96 [(14.96 - 6.00) / 1.00].
However, beta becomes much more meaningful when stocks are combined into a portfolio and the portfolio beta is calculated.