Hi David,
Given the formula of beta (slide 16), I was thinking hard that can beta be negative and if yes then what will be the impact on the expected return?
Considering the formula = Beta = Cov (m,i)/var m, if we use the formula for correlation then this will become Beta = correlation(m,i) * var i , now if this is correct, then in case if the security is having negative correlation then beta should be negative.
But how do we interpret negative beta, and are there any securities with negative beta...
In addition to this, is there any relation between CML and SML ?
Look fwd to your guidance on this..
thnx
OM
Given the formula of beta (slide 16), I was thinking hard that can beta be negative and if yes then what will be the impact on the expected return?
Considering the formula = Beta = Cov (m,i)/var m, if we use the formula for correlation then this will become Beta = correlation(m,i) * var i , now if this is correct, then in case if the security is having negative correlation then beta should be negative.
But how do we interpret negative beta, and are there any securities with negative beta...
In addition to this, is there any relation between CML and SML ?
Look fwd to your guidance on this..
thnx
OM