1 year Beta from BetaFunc

Anyone know how to specify the parameters for BetaFunc to create a 1 year Beta?
I think it would something like BetaFunc(21,12,x) but am not sure about the min-samples. Would you use 1,2 or 3 years of min-samples?

thanks.

If you want 1 year beta on monthly samples, you would do BetaFunc(21,12,x) as you noted. Min samples just means how much history is required to compute anything (instead of computing N/A). As an example, run a screen on the Russell 3k with the following two lines:

ShowVar(@beta_min,BetaFunc(21,12,12))
ShowVar(@beta_nomin,BetaFunc(21,12,1))

Sort the report by @beta_min and you will see that there are 4 stocks where @beta_min = N/A but @beta_nomin has some value. If you look at the history for those stocks, you’ll see they’ve been listed for < 12 months, so they didn’t meet the minimum samples criteria for @beta_min.

The BetaFunc documentation is slightly confusing for two reasons:

  1. The behavior of min_samples = 0 seems to mean “require all samples” rather than “allow any number of samples”. You can verify this yourself by comparing the results of BetaFunc(21,60,60) and BetaFunc(21,60,0) which are identical.

  2. The last example (“BetaFunc(1,750,250) : Beta using 3 years of daily returns with a minimum of two years of prices (250 samples)”) is incorrect, it should read “with a minimum of one year of prices”.

So if you wanted to be sure you were using 1 year beta, and removing anything that didn’t have a 1 year history, BetaFunc(21,12,12) or BetaFunc(21,12,0) should both work. I might suggest that if you’re going to compute 1 year beta, you might shorten your sample period so that you have more samples to work with (such as BetaFunc(5,50,50)), but that’s up for debate.

Great. thanks. I was not even sure what the context of min-sample was, even though I had an idea. I appreciate the background. I tried what I was attempting using BetaFunc(21,12,24), which I thought was two years of samples (in one month chunks) , which should be plenty. It looks like it is ok.

I was confused by the BetaFunc(1,750,250) example and thought what you said, it is one year of prices used (since it was using single bars). So that did confuse me…

I’ll do the screen sanity check as well. I too like to use simple screens (along with the Fundamental charts) to help ‘visualize’ my formulas and factors. It is a great help.

As an aside, I know that beta has a decay over time. That it, it gets less accurate the longer the time span. My guess is that 3 years is about the longest time span that it is useful.

I dunno. The industry standards for calculating these are 3-year weekly and 5-year monthly, so I certainly wouldn’t worry about inaccuracy until you go further than five years back.