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What is dual-beta?


This is the idea that a market beta, a coefficient which indicates whether an investment is more or less volatile than the market as a whole, can be divided into two betas - downside beta and upside beta.

Where have you heard about dual-beta?

You might have heard how beta can be useful for investors to calculate the risk of an investment. Dual beta allows investors to differentiate the risk of loss, or downside risk from gain, or upside risk.

What you need to know about dual-beta.

A traditional beta calculation assumes that upside and downside risk are identical, even though most investors know this is not usually the case. Beta is known to underestimate downside risk and overestimate upside risk. Dual-beta doesn't assume that upside beta and downside betas are the same. Instead, it involves calculating what the values are for the two betas, allowing investors to make better-informed decisions. But even though it may be more accurate, it's not usually cost-effective for individual investors and is more often used by financial planners.

Find out more about dual-beta.

Check out our guide to international beta to learn more about how beta can be applied to global markets.

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