Can someone pt me to a good example of effective beta or give a good explanation of it? -Thanks
% Chg in Portfolio / % Chg in Market
You have a portfolio worth $100, with beta of 1.2. You want to change the beta (skipping the math here)…let’s say that you long 10 S&P contracts, each contract is at $100. Few days later…market went up by 5%, and your S&P contract are $102…So You portfolio is worht $105, profit from future is 10*(102-100)=20 Overall is (105+20)/100=25% You gain=25%, market gain=5% your effective beta is 25/5=5 I skipped some detail, but I hope you got the idea. Number are totally made up.
Ok pretty simple, makes sense, I don’t know how the he!! I got it wrong on the mock probably got the wrong portfolio return our something. thanks