Analysis of Equity Beta Components: New Results and Prospectives in a Low Beta Framework

Antonio Amendola, Dennis M. Montagna and Mario Maggi ()
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Mario Maggi: University of Pavia

Journal of Economics and Financial Analysis, 2019, vol. 3, issue 1, 1-26

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 Beta 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 Beta 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.

Keywords: Asset Allocation; Quantitative Portfolio Management; CAPM; Hedge Funds; Correlation; Beta Anomaly. (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:trp:01jefa:jefa0021

DOI: 10.1991/jefa.v3i1.a21

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