  We present a reactive beta model that includes the leverage effect to allow
hedge fund managers to target a near-zero beta for market neutral strategies.
For this purpose, we derive a metric of correlation with leverage effect to
identify the relation between the market beta and volatility changes. An
empirical test based on the most popular market neutral strategies is run from
2000 to 2015 with exhaustive data sets including 600 US stocks and 600 European
stocks. Our findings confirm the ability of the reactive beta model to withdraw
an important part of the bias from the beta estimation and from most popular
market neutral strategies.
