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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 <> 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.


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.


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 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 ?
Blocking the effects of beta-endorphin with naloxone, the same drug used to treat heroin overdoses, also blocked the boost in the mice's pain threshold, the researchers found.
Beta-endorphin concentration after administration of sucrose in preterm infants.
Beta-endorphin, Metenkephalin and corresponding opioid receptors within synovium of patients with joint trauma, osteoarthritis and rheumatoid arthritis.
The induction of beta-endorphin appears to be hard-wired to the tanning pathway," Fisher said.
Furthermore, review articles tell of rats trained to run spontaneously that showed an increase both in beta-endorphin and in monoamine concentration in their cerebrospinal fluid (1, 9).
For the first time, a rodent study has confirmed that low to moderate levels of alcohol alter beta-endorphin release in the midbrain/Ventral Tegmental Area (VTA) region, producing the pleasant effects that likely reinforce alcohol consumption.
Some progress has been made in finding markers that predict people's genetic predisposition to alcoholism, such as genetic differences in several neurotransmitters, including beta-endorphin and gamma-aminobutryic acid (GABA).
Contrave is designed to activate a hypothalmic center in the brain associated with reduced appetite, while blocking beta-endorphin, which may be responsible for limiting weight loss.
Ben is one of 33 people worldwide with congenital insensitivity to pain, thought to be caused by a lack of beta-endorphin which controls pain sensations.
Hypothalamic beta-endorphin restrains the secretion of hypothalamic LHRH and inhibits the HPG axis.
Now she wants to try out her theory that the reason the babies do better is because stroking releases their beta-endorphin, the body's natural painkillers.
In addition, clinical studies have shown an increase in both serotonin and beta-endorphin levels.