Analysis of Equity β Components: New Results and Prospectives in a Low β Framework
Journal Title: Journal of Economics and Financial Analysis - Year 2019, Vol 3, Issue 1
Abstract
This work aims to exploit the so-called "Beta anomaly" regarding the risk-reward relationship, and set up rules and methodologies in order to build new efficient portfolios. It is well known in literature, and among practitioners, that “Low Beta strategies” generate good performances exploiting alpha opportunities. In this paper we focus on β parameters: we analyze this one and its components (Correlation and Standard Deviation) in order to better understand the drivers and contributions behind the “Low Beta strategies”, and eventually exploit them. We perform an extensive empirical analysis on the S&P500 and the relative sectors, covering more than 10 years. In addition we follow Long/Short strategies in building portfolios based on β and their components where we compare results against the benchmark. We also introduce "Walking Beta" approach in order to give a deep and innovative view on the market risk/reward relationship, illustrating different time frames and the evolution of risk parameters.
Authors and Affiliations
Antonio AMENDOLA, Dennis M. MONTAGNA, Mario MAGGI
Keywords
Related Articles
- EP ID EP491940
- DOI -
- Views 90
- Downloads 0
Interest Rate Swaptions: A Review and Derivation of Swaption Pricing Formulae
In this paper we outline the European interest rate swaption pricing formula from first principles using the Martingale Representation Theorem and the annuity measure. This leads to an expression that allows us to apply...
The causality between Financial Development and Economic Growth in Ethiopia: Supply Leading vs Demand Following Hypothesis
This paper investigates linkage between financial development and economic growth in Ethiopia during the period from 1975 to 2016 using Autoregressive Distributed Lag (ARDL) approach. The paper also schedules Vector Erro...
Does Statistical Significance Help to Evaluate Predictive Performance of Competing Models?
In Monte Carlo experiment with simulated data, we show that as a point forecast criterion, the Clark and West's (2006) unconditional test of mean squared prediction errors does not reflect the relative performance of a s...
Nonprofit Organizations in Disaster Response and Management: A Network Analysis
This paper tracks changes in the national disaster management system with regard to the nonprofit sector by looking at the roles ascribed to nonprofit organizations in the Federal Response Plan (FRP), National Response P...
Differential Investors Response to Restatement Announcements: An Empirical Investigation
When firms announce a restatement of their financial reports, they inform investors that their prior announcements were faulty. Not only do companies lose credibility at times such as this but also their securities are r...