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 ?
greater hazard than those that emit beta particles and gamma radiation.
Some of the earliest bind iodine-131, an isotope that emits low-energy gamma radiation along with a beta particle.
If a particular atom broke down to emit an alpha or beta particle, it would seem that a definite energy source had been broached, and particles of definite energies ought to be given off.
This new device, called the betatron (because it accelerated beta particles), made useful electron bombardment possible.
Moe and his colleagues have spent the last few years looking for a form of radioactivity known as neutrinoless double-beta decay, characterized by the simultaneous emission of two beta particles, or electrons.
By now it was understood that beta rays were streams of speeding electrons (beta particles), while gamma rays were electromagnetic radiation of still shorter wavelength and higher frequency than X rays.
To determine the neutrino mass, Stoeffl and his co-workers use a special apparatus to measure the energies of beta particles, or electrons, emitted by the decay of a radioactive form of hydrogen known as tritium.
Many radioactive atoms decay by emitting beta particles, or electrons, thereby transforming themselves into new elements.
The rarest of all observed radioactive event sinvolves the simultaneous decay of two neutrons within an unstable atomic nucleus to form two protons, accompanied by the emission to two beta particles (electrons) and two neutrinos.
Simpson of the University of Guelph in Ontario reported a tiny anomaly in his measurements of the energies of beta particles, or electrons, emitted during the radioactive decay of tritium atoms.
Unlike strontium-89, rhenium-186 gives off imageable gamma-particle emissions in addition to beta particles, enabling scientists to monitor the compound's distribution and amount with ease, Maxon says.
A third type is gamma emission, in which the atom gives off a highly energetic photon along with the alpha or beta particle. Another is neutron emission, which is when a neutron escapes the nucleus.