Beta Values

[RupaR]

How would you decide on the time frame to your Beta calculation?

Specifically, if investing around Daily and Hourly commodity prices, what do you consider before estimating the Beta against any Dow Jones Commosity Index as benchmark?

Thank you for your comments.

 

[Gubo]

Beta assumes that the CAPM holds in all cases which I highly doubt. I use two measures: 30 day rolling correlation and implied volatility. But then again it depends what are you trying to achieve (how you will use it) with this information...

 

[RupaR]

Hi Gubo,

Thank you for your response.


I am interested in your 30 day rolling correlation measure.
Could you please explain its calculation?

I have developed different daily trading strategies. In order to be able to advocate them, I need to pull out the Jensen's Alpha to the (monthly) returns from these trading strategies, against DJUBS Commodity Index as bench-mark.

If I set my Beta to be monthly (in line with my monthly returns) I get very interesting Alpha values.
But I am worried my investor customers will question me on my Betas being different across months. (Theoritically there is no such thing as a seasonal Beta). This is my problem.

But the outcome of my trading strategies will be different in Summer and Winter seasons as the prices of commodities being traded in my strategies, are affected by seasonal temperature/weather. Therefore to capture the impact of these effects, my returns remain monthly and I in square one.