Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Encyclopedia, Wikipedia.


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.


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 ?
SQL Server 2005 Beta 2 will include new technology such as cross-language debugging and enable Visual Studio 2005 to take advantage of business intelligence functionality, which will help increase developer productivity.
So Tammy closed that chapter and joined a Beta Sigma Phi chapter of older women, including Fran Jones and Nelda Marshall who have been members for 40 years.
One cannot conclude from these data that beta carotene supplementation is entirely without benefit," Greenberg wrote.
CVD believes that another lender to Beta Well, the Alberta Treasury Board, has a security position in most of Beta Well's assets; hence, the recovery to CVD from Beta Well is uncertain.
Anyone with an internet connection can access Photoshop CS3 Beta One-on-One by visiting the lynda.
Using the winning beta cell line, the researchers cultured enough cells to transplant 3 million into each of 10 diabetic mice lacking immune activity.
One of the beta carotene studies, the Physicians' Health Study, involved 22,071 doctors who were randomly assigned to take 50 milligrams of beta carotene or a dummy pill every other day.
Beta also has notified the SEC through filing of a Form 12b-25 that it intends to file a late Form 10-KSB to facilitate consolidation of the year end financial accounts and to receive final audit and Board of Director approvals.
Kulkarni and his colleagues observed changes in beta cell mass out of proportion with the degree of obesity, suggesting that MCH had a direct effect on islets.
And some scientists studying eye and heart disease have also started to look beyond beta.
Beta has advised the AMEX that Beta wishes to avail itself of the procedures under the AMEX rules to meet with appropriate officers of the AMEX to present its reasons why Beta believes its securities should not be removed from listing.
DuVal's DNA analysis found no offspring produced by beta males.