Adjusted beta
Many researchers and professionals find that beta has a mean-reverting tendency. It means that if this period's beta is less than 1, there is a good chance that the next beta would be higher. On the other hand, if the current beta is higher than 1, the next beta might be smaller. The adjusted beta has the following formula:
Here, βadj is the adjusted beta and β is our estimated beta. The beta of a portfolio is the weighted beta of individual stocks within the portfolio:
Here is the beta of a portfolio, wi (βi) is the weight (beta) of ...
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