long/short - beta neutral

blueraincap · February 6th, 2014, 1:10 am

My question is very simple, how do you really aim to be beta neutral in a equity long/short portfolio in practice.I have read many portfolio mgmt books, but they either assume a deterministic beta or use a range of price factors resulting in no realistic hedging combination.

yin413 · February 6th, 2014, 3:10 pm

I am quite new to it as well. Let me guess. determine the regression risk factors first either from the index components / index? Or even use PCA to extract some of the components from of index?? Then run a regression? Just a guess. I want to know the ans as well.

blueraincap · February 9th, 2014, 11:25 pm

hi, yes, those are what most books say. theoretically they make sense, but we all know that those factor loadings change based on market sentiment. or we just have to suck up the data snooping risk?