BetaTailRisk · Risk · Kelly and Jiang (2014)

Tail risk beta

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1932Q1 to 2024Q4.

Expected return · posterior mean, % per quarter

Next quarter

1.34%

95% interval −0.48% to 2.84%

Next year

1.05%

95% interval −0.49% to 2.41%

Next five years

0.21%

95% interval −0.74% to 1.30%

Next quarter

−0.02%

95% interval −0.53% to 0.46%

Next year

−0.07%

95% interval −0.64% to 0.50%

Next five years

−0.19%

95% interval −0.99% to 0.63%

Next quarter

2.45%

95% interval −0.47% to 4.87%

Next year

1.97%

95% interval −0.47% to 4.07%

Next five years

0.58%

95% interval −0.68% to 2.02%

Next quarter

0.08%

95% interval −0.61% to 0.72%

Next year

0.03%

95% interval −0.71% to 0.75%

Next five years

−0.14%

95% interval −1.11% to 0.84%

Cumulative market-adjusted return

−86% since 1932Q1 · log scale

Window	Mean	Vol.	Sharpe	t
1932Q1–2024Q4	−1.21%	13.31%	−0.09	−0.88
2020Q1–2024Q4	9.89%	14.41%	0.69	1.53
2024Q1–2024Q4	28.24%	23.43%	1.21	1.21
1932Q1–2024Q4	−1.30%	10.99%	−0.12	−1.14
2020Q1–2024Q4	2.86%	8.46%	0.34	0.76
2024Q1–2024Q4	−5.65%	8.34%	−0.68	−0.68
1932Q1–2024Q4	−0.66%	17.13%	−0.04	−0.37
2020Q1–2024Q4	22.17%	21.80%	1.02	2.27
2024Q1–2024Q4	53.31%	36.78%	1.45	1.45
1932Q1–2024Q4	−1.17%	13.57%	−0.09	−0.83
2020Q1–2024Q4	2.76%	11.59%	0.24	0.53
2024Q1–2024Q4	−7.09%	10.25%	−0.69	−0.69

Horizon	Mean	95% interval	P(neg)
Next quarter	0.204	−0.072 – 0.437	0.09
Next year	0.159	−0.075 – 0.366	0.10
Next five years	0.032	−0.112 – 0.195	0.36
Next quarter	−0.004	−0.098 – 0.085	0.53
Next year	−0.012	−0.117 – 0.092	0.59
Next five years	−0.034	−0.181 – 0.113	0.68
Next quarter	0.289	−0.055 – 0.581	0.06
Next year	0.231	−0.055 – 0.481	0.07
Next five years	0.068	−0.080 – 0.236	0.21
Next quarter	0.013	−0.090 – 0.108	0.39
Next year	0.004	−0.105 – 0.112	0.47
Next five years	−0.021	−0.163 – 0.124	0.62