beta coefficient (redirected from Beta (investment))
Also found in: Dictionary
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.