SNSN schreef op 27 juni 2014 09:57:
[...]
Morning Agatan,
Just didn’t see your question, sorry, it’s very busy time.
Yes, because of fundamental reasons the undervalued kpn fund is NOT correlated with overvalued aex and other indices.
But it’s not just my analysis - it’s an objective fact that can be easy verified by anyone. The matter is that kpn’s “beta” is currently small and “negative” (while just a year ago, or so, it was almost zero - slightly positive).
Roughly speaking the parameter “beta” (introduced in Capital Asset Pricing Model) measures dependences of a particular fund return upon the fully diversified “total market-returns” (indices). Both “alpha” and “beta” may be calculated at any time using prices data and linear regression with certain “windows“ (or “moving windows“ which allow to see their dynamics):
R(kpn) = “alpha” + “beta”*[R(aex)-R(rf)] + “epsilon”
R(kpn)/R(aex) - time-series of price-returns for kpn/aex, R(rf) - so-called “risk-free” return; “alpha” - is a systemic fund-return specific for the particular fund (for instance, kpn); “beta” - is a part of “total market return” (for instance, aex) carried by the particular stock. As for "epsilon" - it's a “small“ and "fully random" stochastic process, often assumed to be a pure "white noise" (independent, normally distributed events)
So, running regressions on different time-intervals you can get both “alpha” & “beta” at different/any time (and for different intervals). Both parameters (and their evolutions) are extremely important for “portfolio construction” (determining the most efficient risk-return trade-off) and even for “stock selection” (stock-picking) when you need to get stocks with large “alpha” or certain “beta”.....
PS. For more details (and how to use "alpha", "beta") - google it