Beta question possible, question

strikethree

I’m doing some performance analysis on our portfolio vs the S&P. I’ve calculated our portfolio’s beta to be slightly less than 1. However, our portfolio has slightly outperformed the S&P. How is this possible?

smartpants

What time period are you looking at? If you started in Oct 2007, S&P is still down like 15%. A beta slightly less than 1 would indicate that you are down slightly less than that. Also, what time increments are you using to calculate your beta?

scr879

Looking at 2011 YTD returns, so both my port and the S&P are positive. I’m calculating beta on daily returns. Basically COVAR(myport,S&P)/VAR(S&P) = beta. I’m getting like 0.94 for the beta, but my portfolio has like 0.42% of alpha.
Not sure how I can be outperforming the S&P with a lower beta in an uptrending market… its pretty close to 1 and the alpha is small so perhaps there is some noise that allows for a bit of leeway on that? Idk how to explain it though and I’m pretty sure I’m not f-ing up my calcs.

cross-ied

Unless you are running an index portfolio, there will be tracking risk. So expected the return on your portfolio to be different than the benchmark.

Flok

I’m not a statistical or beta expert, but I suspect using daily is reducing the beta. Not sure what you can do about it though, since you would have so few data points if you go with weekly instead.

dyga

Is there a software to find portfolio beta automatically? I don’t really feel like putting my CFA-learned wisdom to use, when I can press a button.

prav_Cfa7

You should be using the function varp, not var, for the denominator.