Capital Markets: Observations and Insights Autumn 2019
Beyond Beta Reframing Risk
• Beta is thought to be a good measure of risk but in practice it is backward looking in nature, making it a poor measure of potential losses ‒ At the tech bubble peak, the beta of technology stocks was less than one; the same was true of financials in early 2008 prior to the Global Financial Crisis
Below Market Risk at Height of Tech Bubble?
Below Market Risk Preceding the Mortgage Meltdown?
S&P 500 Technology Sector
S&P 500 Financial Sector
Source: FactSet. Beta calculated relative to S&P 500 on 12-month trailing basis. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.
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