Glossary term
Beta Convexity
The asymmetry between a stock's beta in up-markets versus down-markets — measured as up-capture minus down-capture against a benchmark. A name with up-beta exceeding down-beta participates more in rallies than it gives back in drawdowns, a favorable asymmetry for compounding through a full cycle.
Definition & Measurement
Standard beta treats a stock's sensitivity to the market as a single number, implicitly assuming the relationship is the same on the way up and the way down. Beta convexity splits that assumption apart: up-beta is measured only across benchmark up-days, down-beta only across benchmark down-days. A stock with up-beta of 1.3 and down-beta of 0.9, for example, captures more than its share of market rallies while giving back less than its share in selloffs — a convex, favorable asymmetry. A stock with the relationship reversed compounds worse over a full cycle even at an identical average beta.
Why the Split Matters
Two stocks can carry the same headline beta of 1.0 while having very different up/down profiles — one symmetric, one skewed in either direction. Averaging hides this, which is why the asymmetry itself, not just the blended number, is the object of interest.
How Closelook Measures It
Closelook's market-structure toolbox computes up-beta and down-beta per name against SPY as the benchmark, reporting the convexity gap alongside other structural metrics such as drawdown behavior. This is a descriptive measure of historical asymmetry, not a forecast of future convexity.