Relationship between ‘beta’ and stock returns Mayur Agrawal Varun Agrawal Debabrata Mohapatra Vikas Yadav.

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Relationship between ‘beta’ and stock returns Mayur Agrawal Varun Agrawal Debabrata Mohapatra Vikas Yadav

Experimental Setup 1 st Jan st Dec 2008 Current Time K months N months  Obtain daily fluctuations on beta portfolios.  Obtain Sharpe ratios after each portfolio readjustment. Default Parameters: N = 60, K = 12, P = 10

Long versus Long-Short Portfolio LongLong-Short Borrow $1 at 0% and invest in low beta portfolio Borrow $1 and invest in low beta portfolio Return $1 to the lender after N days Return $1 worth of today’s high beta portfolio to lender after N days Loss is limited to invested amount Unlimited loss can occur

PNL Plot for Beta Portfolio

PNL Plot for Long Short Portfolio

Sharpe Ratio for Beta Portfolios

Sharpe Ratio for Long-Short and SnP

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