Sunday, May 05, 2019

Target Portfolio vs. the MSCI World Index

The graph shows monthly returns for the target portfolio vs. the MSCI World Index in Australian Dollar terms. The linear fit shows a beta of about 0.3 – if the market rises 1% more , the portfolio tends to rise 0.3%. Alpha is at around 8% per year. The orange line is a quadratic fit. This suggests that beta increases, the more the market rises, while for large down moves beta is zero. This is the kind of asymmetric relationship you want to get.

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