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Agnico-Eagle Mines , beta = -0.33 As a mining company, Agnico-Eagle produces gold, and lately, it has had some big success. ... The right way to invest in negative-beta stocks
If an asset has a beta above 1, it indicates that its return moves more than 1-to-1 with the return of the market-portfolio, on average; that is, it is more volatile than the market. In practice, few stocks have negative betas (tending to go up when the market goes down). Most stocks have betas between 0 and 3. [1]
Securities with a negative beta, which is unusual, will typically move inversely to the market. So when the market goes up, these securities fall, and vice versa. So when the market goes up, these ...
In investing, downside beta is the beta that measures a stock's association with the overall stock market only on days when the market’s return is negative. Downside beta was first proposed by Roy 1952 [ 1 ] and then popularized in an investment book by Markowitz (1959) .
An example is a stock in a big technology company. Negative betas are possible for investments that tend to go down when the market goes up, and vice versa. There are few fundamental investments with consistent and significant negative betas, but some derivatives like equity put options can have large negative beta values. [6]
Warren Buffett’s company Berkshire Hathaway (BRK.B) has outperformed the S&P 500 by nearly 10 percent annually since 1965. This means that a $1,000 investment in the S&P 500 at the beginning of ...
For example, if a stock increased by 5% because of some news that affected the stock price, but the average market only increased by 3% and the stock has a beta of 1, then the abnormal return was 2% (5% - 3% = 2%). If the market average performs better (after adjusting for beta) than the individual stock, then the abnormal return will be negative.
There is a question about what the SML looks like when beta is negative. A rational investor will accept these assets even though they yield sub-risk-free returns, because they will provide "recession insurance" as part of a well-diversified portfolio. Therefore, the SML continues in a straight line whether beta is positive or negative. [3]