beta coefficient


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Beta

A measure of a security's or portfolio's volatility. A beta of 1 means that the security or portfolio is neither more nor less volatile or risky than the wider market. A beta of more than 1 indicates greater volatility and a beta of less than 1 indicates less. Beta is an important component of the Capital Asset Pricing Model, which attempts to use volatility and risk to estimate expected returns.

beta coefficient

a measure of the responsiveness of the expected return on a particular FINANCIAL SECURITY relative to movements in the average expected return on all other securities in the market. The Financial Times all-share index or the Dow-Jones index are usually taken as proxy measurements for general market movements. In the CAPITAL-ASSET PRICING MODEL, the beta coefficient (β) is taken as a measure of the market (or non-diversifiable) RISK of a particular security. The beta coefficient links the return on the security and the average market return. The average market risk of all securities is where β = 1, that is, a 10% increase in market return is reflected as a 10% increase in the return of, say, security A. If the return on, say, security B, is 20%, but there is only a 10% increase in market return, this security has a β= 2 which indicates a risk greater than the market. If security C has a β= 0.5, this indicates a security less risky than the market in general. See EFFICIENT-MARKETS HYPOTHESIS.
References in periodicals archive ?
Among the 14 evaluation criteria, the indicators DOL, beta coefficient, and O6 have the smaller-the-better characteristic, and the remaining indicators have the larger-the-better characteristic.
As discussed earlier, the beta coefficient for early stage start-ups cannot be derived from past values or by comparison with companies of a peer group.
8 Notice, however, that the use of weekly data for calculation of beta-convergence gives us the advantage of minimising noise (holiday effects and time zone differences playing a greater role on daily frequency) and at the same time we can still discriminate between countries; in other words the beta coefficients do not equal unity in all cases.
Farid Lian, AIC Senior Vice President for Research and Business Development commented "perhaps the main achievement of AIC research team, has been the development of a fully automated system which, when activated, would autonomously update itself to capture developments in total performance constituents, detect and indicate the listing of new shares, and recalibrate itself accordingly, so as to return the updated Beta Coefficient for each of the market's twelve sectors at any point in time.
Finally, the volatility of regional chemical production and global chemical production was compared using beta coefficients.
Similar to the Treynor measure, the Jensen's alpha performance metric utilizes the beta coefficient in accounting for risk in the assessment of returns outperformance.
While the significance of the book value coefficients is as previously predicted by prospect theory, the Beta coefficient is markedly so.
Calculating the beta coefficient for companies of various degrees of capitalization, Annin noticed that the beta coefficient of small companies fluctuates much more over time than it does for large companies (Annin 1997).
Standardized beta coefficients are useful when the independent variables representing the model are of different units as in this case.
si] = firm i's beta coefficient for the size factor,
We notice however, that the beta coefficient of the trend is also very high, which means that technology and other factors are also keeping pace with the high risk, hence dampening the full effects of the exposure.
Table 1 Beta Coefficients and t-Values Among Predictor and Outcome Variables Performance Beta Coefficient t-Value Performance Cue Athlete Ability .