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What is asset Beta?

Asset beta, or unlevered beta, on the other hand, only shows the risk of an unlevered company relative to the market. It includes business risk but does not include leverage risk. Levered beta (equity beta) is a measurement that compares the volatility of returns of a company’s stock against those of the broader market.

What is market beta?

The market beta of an asset , observed on occasions, is defined by (and best obtained via) a linear regression of the rate of return of asset on the rate of return of the (typically value-weighted) stock-market index : where is an unbiased error term whose squared error should be minimized. The coefficient is often referred to as the alpha .

Are stock index futures a good choice for beta replication?

Stock index futures, especially E-mini S&P 500 futures, are the institutional choice for beta replication and can allow investors large and small to achieve the elusive goal of cheap beta. Beta can now be sourced efficiently and cheaply around-the-clock in nearly any major stock index. The market in this case is the S&P 500.

Are Futures a good way to get beta exposure?

Futures are a cheap and efficient way to obtain beta exposure. In fact, investors can replicate exposure in just about any type of market. While other sources for beta replication (swaps/options/ETFs) exist, futures offer the best combination of efficiency, liquidity and low transaction costs.

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