Duration/Investment Amount For Beta Calculation

General
1

[+] @Karthik

I love this Module - http://zerodha.com/varsity/chapter/hedging-futures/ and I have gone through https://www.nseindia.com/products/content/equities/indices/beta.htm to understand the nitty gritty of the beta calculation.

My question is what is the duration you should be considering for beta calculation? And does it really matter while taking the hedge with future since it is anyway going to be for 30 days max? I have seen that you have said 6 months for the purpose of calculation. Is that a norm / standard … or just a number.

Also, if someone can add pointers to correct Beta values that NSE considers … or Any archive EoD file where Beta values are published?

2

Thank you :slight_smile:

I suggest you calculate the Beta for 1 year. However, you can calculate both 6 months and 1 years. Ideally, the beta should not have changed (drastically) for these time periods.

NSE has this note on Beta and they also publish the beta values of the indices here https://www.nseindia.com/products/content/equities/indices/archieve_indices.htm

Goto Select Report and click on the 2nd report (market capitalization, beta etc).

3 Likes
3

Brilliant … Yup … It has the beta column for Index stocks.

Also, there is a small note at the bottom of the same file which says -

  • Beta & R2 are calculated for the period 01-June-2017 to 31-May 2018

So you are absolutely right.
Thanks a ton. :slight_smile:

4

Hi @Karthik,

I have one more doubt around Investment Amount and I have changed the subject line to reflect the same. Is the Investment Amount for the stock for hedging calculated via -

  1. quantity * average_buy_price
    or
  2. quantity * current_price

I am assuming it is the former (quantity * average_buy_price) … but correct me if I am wrong for portfolio value is more correctly represented by (quantity * current_price)

Thanks in advance.

5

Yes, Qty*Current Price gives a more accurate reprrsentation of your portfolio size.

1 Like
6

Ack. Will use the same … :slight_smile: