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
Date Written: June 3, 2010
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: Suggested Citation