Schweser vol3-224 said that for adjusted beta: beta(t) = alpha 0 + alpha 1 * beta (t-1) the higher the alpha1 the faster the beta get closer to 1. I think it is WRONG. Coz one fast example is that we can set alpha 0 to 1. So alpha 1 = 1 - alpha 0 = 0 no matter what beta (t-1) you give, the new beta (1) is always 1. which is different from what is concluded by schweser. I also couldn’t find the conclusion from the curriculum.
Its higher the alpha0, more faster beta(t) will move to its mean reverting level
quantforCFA Wrote: ------------------------------------------------------- > Its higher the alpha0, more faster beta(t) will > move to its mean reverting level that means schweser is all the way WRONG about this. lol
I called Tim Swaby out on this and he agrees. It is wrong in various parts of the schweser ciriculum and in a problem in Book 6 3am (I think).
schweser online errata people - they have cleared it up…
so what’s the final version now?? is it something different from “the higher the alpha1 the faster the beta get closer to 1”