Alternative Beta - Different Betas Based On Different Investment Exposures

Different Betas Based On Different Investment Exposures

Traditional betas can be seen as those related to investments the common investor would already be experienced with (examples include stocks and most bonds). They are typically represented through indexation, and the techniques employed here are what is called “long only”. The definition of alternative beta in contrast requires the consideration of other investment techniques such as short selling, use of derivatives and leverage - techniques which are often associated with the activities of hedge funds. The underlying non-traditional investment risks are often seen as being riskier, as investors are less familiar with them.