Assuming we are talking about the dual-beta idea where we restrict benchmark returns to negative (downside beta) and positive (upside beta), then I have the following confusions.
Do we only interpret one side of upside beta? For example, for an upside beta of 1.5, we only interpret the upward movement in market returns by saying “in an up-market, a 1% increase in market returns means a 1.5% increase in share returns.” When I start thinking about interpreting a decline, things get confusing. Would it be: “in an up-market, a 1% decline in market returns (but always remaining positive… remembering the constraint) means a 1.5% decline in share returns?”
The same issue comes up for me when I try to interpret an increase in market returns of 1% for a downside beta of 1.5. Interpreting a downward movement is natural: “in a down market, a 1% decline in market returns means a 1.5% decline in share returns.”
Am I running into this issue because we only interpret the upward movement for upside beta, and only downward movement for downside beta? It seems obvious when I write that, but feel as if the other sides have meaning. Am I wrong?
Additionally, this article (https://seekingalpha.com/article/1578622-dual-beta-the-smart-investors-most-valuable-tool) quotes every downside beta as negative. He says “ with a downside beta of 0.40, actually gains by about 40% of what the broad market loses in bear market months.” Isn’t he completely incorrect?
