Market Beta Drift

Market beta drift is the tendency of a stock's sensitivity to the market to change over time rather than stay fixed. A company that takes on leverage, shifts its business mix, or moves between growth and value regimes will see its beta move with it. Treating beta as a constant when it is in fact drifting leads to mispriced hedges and misattributed alpha.

You expose drift by re-estimating beta over rolling windows (commonly 30, 60, or 90 days) and watching how the estimate moves. A short window reacts fast but is noisy; a long window is smooth but lags real change. Comparing a stock's beta path to its sector peers helps tell a genuine structural shift from ordinary estimation noise.