Hi everyone there,
Regarding β, Ι have clear it’s a relative measure of risk, which measures changes in asset (or potfolio) returns given a change in Market’s return, calculated through regression analysis (slope of the regression). As we know, β = ρ x (σp / σm). Thus, beta depends partially on the amount of unsystematic risk included in the particular asset or portfolio being analyzed. I want to understand (please correct me if I’m wrong) that if a particular asset or portfolio is including high unsystematic risk, it will be partially compensated with lower correlation with the market, lowering β. I say that because in the event we have a high unsystematic risk included in σp and a high correlation with the market, expected return for that portfolio would be high, i.e. we would be rewarding unsystematic risk!!! Can somebody throw some light here please? Which are highest betas found in the market? Thank you in advance.
Regarding β, Ι have clear it’s a relative measure of risk, which measures changes in asset (or potfolio) returns given a change in Market’s return, calculated through regression analysis (slope of the regression). As we know, β = ρ x (σp / σm). Thus, beta depends partially on the amount of unsystematic risk included in the particular asset or portfolio being analyzed. I want to understand (please correct me if I’m wrong) that if a particular asset or portfolio is including high unsystematic risk, it will be partially compensated with lower correlation with the market, lowering β. I say that because in the event we have a high unsystematic risk included in σp and a high correlation with the market, expected return for that portfolio would be high, i.e. we would be rewarding unsystematic risk!!! Can somebody throw some light here please? Which are highest betas found in the market? Thank you in advance.