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 ?
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).
Our objective function decomposes (approximately) the variance of the tracking error or the portfolio beta into the correlation coefficient of the portfolio and the index and the ratio of their standard deviations.
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.
b = coefficient as a measure of systematic risk / average portfolio beta
equity portfolios, they find that minimization of portfolio beta variability cannot be achieved by combining stocks which, individually, have low 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.
We run the univariate regressions of average portfolio returns on the average conditional portfolio beta for each month from July 1963 to December 2004.
Typically, the portfolio Beta is measured against the benchmark, so the benchmark should have a Beta of 1.
However, beta becomes much more meaningful when stocks are combined into a portfolio and the portfolio beta is calculated.
Table 1: Sensitivity and explanatory power for the market model entire period from 1980-2000 Average Portfolio Beta [R.
Since portfolio beta reflects an average of individual security betas, portfolio risk prediction is inseparable from individual risk prediction.