medium · FRM Part 2 Risk & Investment Management
A risk manager is performing a 'lag-adjustment' on the market beta of a direct lending fund. Regressing reported returns on the contemporaneous market index yields a beta (β_0) of 0.15. Regressions on the index lagged by one and two quarters yield β_1 = 0.25 and β_2 = 0.10 respectively.
What is the most defensible estimate for the fund's 'true' economic beta?
- 0.15
- 0.25
- 0.50
- 0.16
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