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 ?
At present, both European and American guidelines advise the use of beta-blockers for symptomatic heart failure without regard to AF status, based on trials that predominantly enrolled patients in sinus rhythm.
Other beta-blockers have a more general action and block shaking and sweating.
We calculated a priori that to observe a 50% increase in effective perioperative beta-blocker therapy in patients prescribed perioperative betablockers from 40% to >60% or a 50% decrease from 40% to <20%, we needed 260 patients in each cohort (type I error 0.
Although patients on beta-blockers in this study were older and more severely injured than were those not taking beta-blockers, mortality rates for the two groups were similar, Dr.
Although beta-blockers have been used for more than 30 years to treat hypertension, cardiac arrhythmias, and migraine headaches, OsteoCorp is optimizing them as a new class of bone-building drug with broad therapeutic applications to prevent and treat osteoporosis and other diseases of bone," said Charles S.
We know these drugs can save lives, so we need to conduct more research to determine why the prescribing rate of beta-blockers for heart failure is exceptionally low in the UK.
Beta-blockers are certainly necessary in many patients who have coronary artery disease; however, an attempt should be made to adjust the dosage to allow attainment of at least 70% predicated maximal heart rate or keep heart rate levels below that which cause ST depression or angina.
While the New York Heart Association functional class was similar in both groups, patients taking beta-blockers had lower heart rates compared with those receiving beta-blocker therapy (mean 68 beats/minute versus 76 beats/minute.
The investigators believe that all patients scheduled to undergo bypass surgery--except for those whose hearts are severely weakened--should receive beta-blocker therapy before surgery.
Use beta-blocker drugs indefinitely on heart attack survivors and people whose hearts are getting an inadequate blood supply.
The findings of the Beta-Blocker Evaluation of Survival Trial (BEST), which contrast with those of other beta-blocker studies, appear in the May 31 issue of the New England Journal of Medicine.
Moser states, this is the only trial in which a beta-blocker arm was compared against a diuretic arm and against placebo.

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