Country Equity Betting Against Beta with Monthly Rebalancing

Summary

This strategy ranks country exchange-traded funds by estimated market beta, measured against a U.S. equity index using a rolling year of daily prices. Each month, it divides the available funds around the median beta, going long the lower-beta group and short the higher-beta group. Holdings are weighted by each fund’s distance from the median, and each side is scaled toward a beta of one, subject to a leverage cap. The resulting portfolio aims to capture the betting-against-beta effect while keeping market exposure near zero.

The document provides an implementation outline, including a list of country funds, monthly signal calculation, portfolio rebalancing, leverage limits, and a simple fee model. It reports no performance results or empirical validation. Practical limitations include dependence on historical beta estimates, ETF availability and trading costs, and the way the code handles missing data and portfolio scaling. The text also mentions using beta extremes instead of median-based groups as a possible variation, but does not test that modification.

Key ideas

• Country ETFs are ranked by rolling beta estimated against a U.S. equity market benchmark.
• The strategy buys the below-median beta group and shorts the above-median group.
• Portfolio weights reflect each fund’s distance from the median beta and are rescaled with a leverage cap.
• Positions are recalculated and rebalanced monthly.
• The document describes a strategy implementation but supplies no performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.