Beta

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Beta

The measure of an asset's risk in relation to the market (for example, the S&P500) or to an alternative benchmark or factors. Roughly speaking, a security with a beta of 1.5, will have move, on average, 1.5 times the market return. [More precisely, that stock's excess return (over and above a short-term money market rate) is expected to move 1.5 times the market excess return).] According to asset pricing theory, beta represents the type of risk, systematic risk, that cannot be diversified away. When using beta, there are a number of issues that you need to be aware of: (1) betas may change through time; (2) betas may be different depending on the direction of the market (i.e. betas may be greater for down moves in the market rather than up moves); (3) the estimated beta will be biased if the security does not frequently trade; (4) the beta is not necessarily a complete measure of risk (you may need multiple betas). Also, note that the beta is a measure of co-movement, not volatility. It is possible for a security to have a zero beta and higher volatility than the market.

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

A mathematical measure of the sensitivity of rates of return on a portfolio or a given stock compared with rates of return on the market as a whole. A high beta (greater than 1.0) indicates moderate or high price volatility. A beta of 1.5 forecasts a 1.5% change in the return on an asset for every 1% change in the return on the market. High-beta stocks are best to own in a strong bull market but are worst to own in a bear market. See also alpha, capital-asset pricing model, characteristic line, portfolio beta.

Beta.

Beta is a measure of an investment's relative volatility. The higher the beta, the more sharply the value of the investment can be expected to fluctuate in relation to a market index.

For example, Standard & Poor's 500 Index (S&P 500) has a beta coefficient (or base) of 1. That means if the S&P 500 moves 2% in either direction, a stock with a beta of 1 would also move 2%.

Under the same market conditions, however, a stock with a beta of 1.5 would move 3% (2% increase x 1.5 beta = 0.03, or 3%). But a stock with a beta lower than 1 would be expected to be more stable in price and move less. Betas as low as 0.5 and as high as 4 are fairly common, depending on the sector and size of the company.

However, in recent years, there has been a lively debate about the validity of assigning and using a beta value as an accurate predictor of stock performance.

References in periodicals archive ?
While some studies have reported a higher detection rate for the free beta subunit, not all findings are in agreement.
The analytes tested for potential cross-reaction with the normal-pregnancy hCGn mAbs included hCG, hCG(3, hCG[beta]n, hCG[beta]cf, hLH, the hLH free beta subunit, and the hLH beta core fragment.
The hLH (AFP-8270B) and hLH free beta subunit (AFP-3282) were kindly provided by the National Hormone and Pituitary Program, National Institute of Diabetes and Digestive and Kidney Diseases.
Development of highly sensitive immunoassays to measure human chorionic gonadotropin, its beta subunit, and beta core fragment in the urine: application to malignancies.
Amino acid sequence of the beta subunit of follicle-stimulating hormone from human pituitary glands.
The effects of FSH on ovarian follicular development and growth have given rise to the hypothesis that FSH functions to enhance laying performance, or egg production, in the chicken, but the beta subunits of FSH vary in different species.
3] or a beta subunit plus a gamma subunit, which could be [[gamma].
As soon as these cells begin to express the Beta subunit of the vitronectin receptor, however, they become highly aggressive, continuously proliferating and deeply invading, which results in high levels of vascular infiltration and an increased rate of metastasis.