Global Market Report - Forty Years of Better Betas - March 2013
Research Paper
March 12, 2013
Preview
In this report, we look at the period between January 1997 and December 2012, comparing two methods of estimating the market risk of a portfolio: historical beta and predicted beta, based on the Barra Global Equity Model (GEM3). We investigate this question: which estimation approach performed best during periods of market stress? We find that during our sample period, predicted beta appears to be a more accurate than historical beta as a gauge of the defensiveness or aggressiveness of a portfolio.
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