Bear Beta

Bear beta is a relative measure of the sensitivity of an investment’s return to negative changes in the benchmark’s return. This separates the beta to show whether negative periods of the fund’s performance are reflected by corresponding negative periods of performance in the benchmark.

For example:

A bear beta of 0.5 implies that for each 1% fall in the benchmark, the fund would fall by 0.5%. Conversely, if the bear beta were -1, for each 1% fall in the benchmark, the fund would rise by 1%.

The general rule is:

• A positive bear beta means that a fall in the benchmark implies a fall in the fund.
• A negative bear beta means that a fall in the benchmark implies a rise in the fund.

The value of the bear beta indicates the magnitude of the above relationship. The smaller the value of the bear beta, the better, and confidence in the beta must be qualified with a strong r-squared correlation between the fund and the benchmark.