What is a beta strategy?
Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization-based indices. Smart beta emphasizes capturing investment factors or market inefficiencies in a rules-based and transparent way.
Beta is a measure of a stock's volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0.
- A zero-beta portfolio is a portfolio constructed to have zero systematic risk or, in other words, a beta of zero. Such a portfolio would have zero correlation with market movements, given that its expected return equals the risk-free rate or a relatively low rate of return compared to higher-beta portfolios.
- Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark which is considered to represent the market's movement as a whole. The excess return of an investment relative to the return of a benchmark index is the investment's alpha.
- A beta of less than 1.0 indicates that the investment will be less volatile than the market. Correspondingly, a beta of more than 1.0 indicates that the investment's price will be more volatile than the market. For example, if a fund portfolio's beta is 1.2, it's theoretically 20% more volatile than the market.
Beta (finance) A beta greater than 1 generally means that the asset both is volatile and tends to move up and down with the market. An example is a stock in a big technology company. Negative betas are possible for investments that tend to go down when the market goes up, and vice versa.
- Smart beta strategies attempt to deliver a better risk and return trade-off than conventional market cap weighted indices by using alternative weighting schemes based on measures such as volatility or dividends. [ 2]
- In statistics, standardized coefficients or beta coefficients are the estimates resulting from a regression analysis that have been standardized so that the variances of dependent and independent variables are 1. Sometimes the unstandardized variables are also labeled as "b".
- Financial analysis Print Email. Definition of market risk premium. Market risk premium is the variance between the predictable return on a market portfolio and the risk-free rate. Market Risk Premium is equivalent to the incline of the security market line (SML), a capital asset pricing model.
Negative beta. A beta less than 0, which would indicate an inverse relation to the market, is possible but highly unlikely. However, some investors believe that gold and gold stocks should have negative betas because they tended to do better when the stock market declines.
- Beyond that, the long-term data for the stock market points to that 7% number as well. For the period 1950 to 2009, if you adjust the S&P 500 for inflation and account for dividends, the average annual return comes out to exactly 7.0%.
- A transistors current gain is given the Greek symbol of Beta, ( β ). As the emitter current for a common emitter configuration is defined as Ie = Ic + Ib, the ratio of Ic/Ie is called Alpha, given the Greek symbol of α. Note: that the value of Alpha will always be less than unity.
- Biasing in electronics means establishing predetermined voltages or currents at various points of an electronic circuit for the purpose of establishing proper operating conditions in electronic components. The AC signal applied to them is superposed on this DC bias current or voltage.
Updated: 18th September 2018