Zero-Beta Portfolio

Posted in Finance, Accounting and Economics Terms, Total Reads: 396
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Definition: Zero-Beta Portfolio

Zero-Beta Portfolio is a portfolio developed to have zero precise danger or, at the end of the day, a beta of zero. A zero-beta portfolio would have the same expected return as the danger free rate. Such a portfolio would have zero relationship with business sector developments, given that its normal return measures up to the danger free rate, a low rate of return.


A zero-beta portfolio is entirely unrealistic to pull in financial specialist enthusiasm for buyer markets , since such a portfolio has no business sector introduction and would accordingly fail to meet expectations an expanded business sector portfolio.


In a bear market, be that as it may, it may pull in some premium, albeit even in such a case, speculators are liable to address whether just putting resources into danger free, fleeting treasuries is a superior and less expensive different option for a zero-cost portfolio.

 

In other words, as per WAI, if there is lesser returnas compared to the cost of equity, the company is actually destroying shareholder value.

 

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