# Equity Market Neutral

We know that in EMN that beta is 0 but what happens to value of long postion and short position? Are they are equal or larger or small compared to each other?

(People here are far more likely to help you if you show them that you’ve put some effort into the question first. Otherwise, it sounds like you want someone else to do your homework for you.)

It should be equal.

I am not sure. Since beta is 0 then I am assuming that exposure for both long and short are equal in market value.

What’s the formula for the beta of a portfolio?

beta= corelation(portfolio,market) * sd of portfolio /sd of market

Not the formula for which I was looking.

• \$10 million of stock ABC with a beta of 1.1
• \$20 million of stock RST with a beta of 0.9
• \$30 million of stock XYZ with a beta of 1.2

What’s the formula for the beta of the portfolio?

1/6*(1.1)+ 2/6*(0.9)+ 3/6*(1.2)

So . . . if you have a zero-beta portfolio with, say, \$100 million in long positions and \$100 million in short positions, what can you tell me about the average long beta and the average short beta?

0=0.5x-0.5y. Equal. Average value of long and short should be equal.

What if the average long beta exceeds the average short beta?

Then beta of the portfolio will not be 0.

I’ve stipulated that it’s a zero-beta portfolio.

Value of long will decrease in comparison to short.

And if the average short beta exceeds the average long beta?

Value of assets will increase.

Value of assets?

Value of long positions will increase in relation to short position.