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Quant Nugget 3: Common Misconceptions About 'Beta' - Hedging, Estimation and Horizon Effects

GARP's Risk Professional Magazine, June 2010

6 Pages Posted: 3 Jun 2010 Last revised: 11 Oct 2010

Attilio Meucci

ARPM - Advanced Risk and Portfolio Management

Date Written: June 3, 2010

Abstract

The intuitive meaning of "beta" is well known to all risk and portfolio managers: the beta is the sensitivity of the return on a given asset to a given risk factor. The applications of the "beta" are manifold, from risk computation and analysis to hedging. However, the precise definition and computation of the beta is far from trivial.

Keywords: Factors on Demand, hedging, factors, exposures

JEL Classification: C1, G11

Suggested Citation

Meucci, Attilio, Quant Nugget 3: Common Misconceptions About 'Beta' - Hedging, Estimation and Horizon Effects (June 3, 2010). GARP's Risk Professional Magazine, June 2010. Available at SSRN: https://ssrn.com/abstract=1619923

Attilio Meucci (Contact Author)

ARPM - Advanced Risk and Portfolio Management ( email )

HOME PAGE: http://www.arpm.co/

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