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 ?
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.
7%, which is lower than usual, and our portfolio beta has also been reduced slightly from about 1 to about 0.
We run the univariate regressions of average portfolio returns on the average conditional portfolio beta for each month from July 1963 to December 2004.
Leverage and shorting notwithstanding, the goal of 130/30 managers is to deliver a portfolio beta of close to 1.
Because we chose a monthly frequency, we use 120 observations to estimate the portfolio beta for a given PSAF year.
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.
6%, which is lower than usual, our ungeared portfolio beta has also been reduced from about 1 to about 0.
10) We estimate portfolio beta by regressing monthly excess returns over the previous 24 months (before portfolio formation) on each portfolio against monthly excess returns on an equally weighted market index.
Fairley (1979) developed a procedure, later refined by HM, whereby a weighted proxy for an insurer's investment portfolio beta is deducted from the observable equity beta to produce a residual beta purported to be the underwriting beta.
p] = Portfolio beta, estimated over 60 prior months, and
To limit potential errors, an insurer is included in the final sample only if the stocks used in estimating the portfolio beta represent at least 85 percent of the 1982 year-end market value of the company's stock portfolio.