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{{def | {{def|Beta|/ˈbiːtə/|n|}}So-so. Ordinary. Unspectacular. Safe. Dull. Meets expectations. Won’t try to rip you off. | ||
Defined in a famous paper by William Sharpe in 1964 — he of the [[Sharpe ratio]] — [[beta]] is defined as: ''“a portfolio risk that cannot be diversified away by adding more securities to it.”'' | Defined in a famous paper by William Sharpe in 1964 — he of the [[Sharpe ratio]] — [[beta]] is defined as: ''“a portfolio risk that cannot be diversified away by adding more securities to it.”'' | ||
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Since the whole market has all the securities in it, you can’t add to that, the whole market has a beta of 1. | Since the whole market has all the securities in it, you can’t add to that, the whole market has a beta of 1. | ||
Therefore, to track [[beta]] is to track the whole market’s performance. Therefore watch out for — well, to put not to fine a point on it — ''bullshit'' products claiming to yield returns like “[[intelligent beta]]”; “[[smart beta]]” or “[[enhanced beta]]”. Nonsense on stilts. | Therefore, to track [[beta]] is to track the whole market’s performance. Therefore watch out for — well, to put not to fine a point on it — ''bullshit'' products claiming to yield returns like “[[intelligent beta]]”; “[[smart beta]]” or “[[enhanced beta]]”. [[Nonsense on stilts]]. | ||
Good article [https://portfoliosolutions.com/latest-learnings/blog/no-such-thing-better-beta here]. | Good article [https://portfoliosolutions.com/latest-learnings/blog/no-such-thing-better-beta here]. | ||
{{Greeks}} | {{Greeks}} | ||