标题: Zero Beta portfolio [打印本页] 作者: suxiaoxiao 时间: 2011-7-13 16:51 标题: Zero Beta portfolio
I am having trouble understanding the concept of 'zero beta portfolio'. Can someone help?作者: Londonrocks 时间: 2011-7-13 16:51
Any portfolio that does not have systematic risk or beta =0. Put it another way, does not vary with market portfolio.
E.g., bank deposit, CD,..
Mind you, the portfolio can still have non-systematic risk, e.g., market neutral hedge fund which both go long and short closely-related stocks can have zero beta, but still has a lot of non-systematic risks.作者: sgupta0827 时间: 2011-7-13 16:51
So how does that translate into high intercept on the y axis and flatter slope for the SML?作者: studyn 时间: 2011-7-13 16:51
The intercept at the Y axis is the zero beta on the X axis. That's the risk free rate with zero systemic risk. Anything further out to the right has positive beta and some systemic risk.
- Robert作者: smartpants 时间: 2011-7-13 16:51
I think it is assumed that the zero-beta portfolio has a higher expected return than the risk-free asset. Because the expected return is higher, that shifts the y-intercept higher.作者: johnnyBuz 时间: 2011-7-13 16:51
What would be an example of a zero beta asset with a return > RF?
- Robert作者: JoeyDVivre 时间: 2011-7-13 16:51
Yes u did, page 269 in the CFA book sir!作者: agulani 时间: 2011-7-13 16:51
Ok on that page in the CFA book it says that we assume the zero beta asset to have a higher return than the RF asset, which makes that intercept higher, and the line flatter.作者: chetan86 时间: 2011-7-13 16:51
Well, still have not found the text (a bit slow today :-)), but what you quote does not contradict what I mentioned.
IF we assume zero beta asset to have a higher return (does not have to be, if you put your money under the mattress, its real return is below zero), then the intercept is higher since the intercept is the return of the zero-beta portfolio. Since the intercept is higher, it makes the line flatter.作者: dece2011 时间: 2011-7-13 16:51
It has nothing to do with arbitrage in this context. The concept of zero-beta portfolio is a substitute in situations where you don't have a risk free asset to derive at the SML line. E.g., investors in developing countries where gov bonds are as risky as corp bonds, thus no natural risk-free asset. Arbitrage fund can be a substitute for riskfree theoretically, I think, though it is hardly any arbitrage fund is risk-free in its real nature since it is hard to have absolute zero beta (in addition to its nonsystematic risk).
In other context, a zero-beta asset can mean arbitrage fund, long-short fund, whatever assets which do not vary with market portfolio.作者: waldziuchna 时间: 2011-7-13 16:51
You seem to be really well prepared elfca....if you don't mind me asking: what is your educational / work background...
Also....how did you get a scanned version of 2010 curriculum ?作者: ramzes 时间: 2011-7-13 16:51
Hes L2 candidate I think lol作者: ishfaque 时间: 2011-7-13 16:51
CFAMaven
Thanks a lot.
Just don't want to brag about my background, I'd skip that. Passed level I some time ago. Have some downtime temporarily, so just try to help you guys out, like many other members who also have passed level I and work tirelessly to answer your questions in this forum without any selfish motives.
Concerning, scanned version of 2010 curriculum: can't say that either :-).
Sorry.作者: mnieman 时间: 2011-7-13 16:51
Cool...I didn't know you already passed, congrats!
