Question regarding "Beta Hedging lecture 11"

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edited Jul 12, 2016

What is the definition of 'dollar-volume' on this website? The traditional definition is 'product of average stock volume and stock price'. In the aforementioned lecture, the author uses code to hedge out the beta by taking a short position of '−βDV, where DV is the total dollar volume of [benchmark].'

However, the code (shown below) uses r_b = [benchmark returns] instead of its 'dollar-volume'

    1. portfolio = -1*beta*r_b + r_a

So, my question is whether benchmark returns and dollar volume are interchangeable terms?

1 response

Delaney Mackenzie

Jul 11, 2016

Hello,

This is indeed confusing. The correct answer is that it should be beta * V, where V is the value of our portfolio. Dollar volume has other contexts and we will update the notebook to fix this.

Thanks,
Delaney

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In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

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