Читать книгу Advanced Portfolio Management - Giuseppe A. Paleologo - Страница 17

We revisit the example portfolio in Table 3.5. We had a portfolio with a large amount of market risk, but we also have $6.7M of idiosyncratic risk coming from SYF and WMT. In addition, we have high conviction that these two stocks will have returns in excess of the market in the next quarter, whereas we have very little idea of the direction of the market over the same time horizon. We can express this by saying that we have an edge in our specific stock selections, but not in the market. Even if we did not hold any SPY, we would risk marring our good insight about the underpriced SYF and WMT stock. A large market drawdown can result in negative returns for the portfolio. If we seek absolute returns from our portfolio, this may not be a wise choice. We can remedy this by taking a short position in SPY. We borrow the shares from an existing owner and we sell them at the market price. At some point in the future, we cover the position by purchasing the shares at the market price and returning them to their owner. Shorting has costs and risk. We pay a “borrow rate” to the lender, which can be high if the stocks are hard to find (or locate). In addition, shorted stocks can be recalled by the original owner if she wants to sell them, forcing us to cover the stock earlier than anticipated.⁹ By shorting SPY, we reduce the beta exposure of the portfolio. The dollar beta for SYF is $12M; for WMT it is $2.5M. The total dollar beta is $25.5m. SPY has a beta of 1. If we sell the entire SPY position and further short $15.5M, the total beta of the portfolio is zero. The market component of the portfolio volatility is proportional to its dollar beta, and is therefore zero. And the idiosyncratic risk of the portfolio? It has not changed, because SPY has no idio volatility (to a very good approximation). The summary statistics of the hedged portfolio are in Table 3.7. The procedure is described in Procedure Box 3.2.

Table 3.7 Synchrony, Wal-Mart and SP500 risk parameters, together with holdings for each asset for a market-hedged portfolio.

Field	SYF	WMT	SPY
Beta	1.2	0.5	1
Daily Market Vol (%)			1.4
Daily Idio Vol (%)	1.2	0.7	0.0
Net Market Value ($M)	10	5	−15.5