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1) In illustration 12, current beta of portfolio is 1.3, required beta is 0.91, market beta is 1 hence we shorted nifty fut, i understood that. But if required beta is suppose 1.2 instead of 0.91, so can we go long and average the beta to 1.2? And in this case, can do we have an alternative to either short or long as beta can come down to 1.2 in both case? 2) In case we go long, then while computing, in the denominator, should we take value of contract too in addition to value of share portfolio, as while going long we have to pay the full amount. Like in short position, we only take returns in numerator but not take value of contract in denominator, So, while going long, should we take it in both numerator as well as denominator?
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Thread Starter
Lalit SanpalAlso sir if we go long , isn't it that we have to pay the full contract value amount instead of paying only margin, because we are buying
On futures irrespective of long or short only margin is paid. Only when you buy in cash market full money is paid
1. if a portfolio beta of 1.3 has to be reduced to any number below it, shorting of index futures is the only way - Going long will only increase Beta . 2. Even when we go long, we do not add the value in the denominator for beta computation - all activity happens only in the numerator
Sriram Somayajula Admin
1. if a portfolio beta of 1.3 has to be reduced to any number below it, shorting of index futures is the only way - Going long will only increase Beta . 2. Even when we go long, we do not add the value in the denominator for beta computation - all activity happens only in the numerator
1. Sir, suppose current portfolio beta is 1.3 and market beta is always 1 and we want to reduce portfolio beta to 1.15 then cant we go long in same investment value and reduce beta to 1.15 by going long instead of short? Eg, 100×1.3+100×1 / 200 =beta of 1.15?
Sriram Somayajula Admin
1. if a portfolio beta of 1.3 has to be reduced to any number below it, shorting of index futures is the only way - Going long will only increase Beta . 2. Even when we go long, we do not add the value in the denominator for beta computation - all activity happens only in the numerator
Also sir if we go long , isn't it that we have to pay the full contract value amount instead of paying only margin, because we are buying
Thread Starter
Lalit Sanpal1. Sir, suppose current portfolio beta is 1.3 and market beta is always 1 and we want to reduce portfolio beta to 1.15 then cant we go long in same investment value and reduce beta to 1.15 by going long instead of short? Eg, 100×1.3+100×1 / 200 =beta of 1.15?
Future / forward long impacts numerator and not denominator So if u r referring to index future, denominator is still 100 so 1.3 will increase to 2.3
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