Beta Weight Portfolio

Discussion in 'Stocks' started by clarodina, Sep 11, 2010.

  1. Hi,

    There are some posters mentioning abt beta weight the whole portfolio to hedge. What does that suupose to mean?

    Also some saying that beta is really inaccurate. What should be the alternative?
     
  2. medisoft

    medisoft

    As I know the beta is the measure of volatility. A beta of 1 means that if the market goes up by 1, then the stock also goes up by one. A beta of (-1) means that if market goes down by 1, the stock goes up by 1.

    So balancing the beta of the portfolio with low, medium, high and negative beta in theory can give a portfolio that make good on almost every time.

    Higher beta are the small-caps
    Lower beta the blue chips
    Negative beta I think are inverse ETFs, and maybe others
     
  3. Are there any excel formulas that I can use to help with beta weighting my stocks to spy or es?
     
  4. You can use the slope(..) function to calculate the beta. Beta is additive, so you can just weigh them.

     
  5. Butterball

    Butterball

    You're using historic beta (e.g. last N days) as an estimate to predict future beta. Hence the inaccuracy.