Can anyone explain the calculation of Effective Beta please -
Alagan Santhianathan, equity strategist at Pradesh & Partners, believes the market will do well over the next six months and wants to increase the beta from 0.80 to 1.25, on the firm’s $250 million portfolio. The beta on futures contracts is 1.05 with a price of $250,000.
Another strategist, Jim Michaels, warns that hedging with futures contracts is not perfect because of the need to round to the nearest whole contract. The firm ends up buying the required number of contracts to achieve a 1.25 beta. Near the expiration of the contracts, the index has increased by 2% while the portfolio value has increased by 1.6% and the value of the futures has increased to $255,250 per contract. B. Calculate the effective beta on the portfolio. Show your calculations.