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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 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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Malondialdehyde (MDA) serum concentrations after intraperitoneal injections of phenylhydrazine (20 mg/kg bw, for two consecutive days) and oral administration of Beta vulgaris leaf and stalk extract (bVe-LD and BVE-SD, 100 and 200 mg/kg bw, for 12 consecutive days) compared to those after the standard (S) ferrous ascorbate+folate (13.5 + 0.135 mg/kg bw, for 12 consecutive days) and normal control (C).
Standard graphic was created using gallic acid (GAE) and total phenolic amounts available in lyophilized water and alcohol extracts of beetroot (Beta vulgaris L.
Staining Technique for Helminth parasites by Use Red Beet (Beta vulgaris L.) Bas.
The fresh roots of Beta vulgaris (1 kg, cut into small pieces) were exhaustively macerated by soaking in 70% (1.5 L) ethanol and the process repeated for three successive days.
[sup.40]K savitojo aktyvumo nustatymo rezultatai Siauliu ir Kedainiu rajonu augimvieciu dirvozemiuose bei paprastuju morku (Daucus carota L.) ir raudonuju burokeliu (Beta vulgaris L.) segmentuose pateikti 1 lenteleje.
Muino 259 Opuntia Cactaceae Penca N sulphurea Gillies ex Salm-Dick Muino 94 Beta vulgaris L.
Effect of salinity on seed germination and early seedling growth of sugar beet (Beta vulgaris L.).
Googling a runner Sugar Beet 2.50 Lingfield Sugar beet is a cultivated plant of beta vulgaris, whose tuber contains a high concentration of sucrose.
Description Red table beets Firm, red beets ideal for roasting, (Beta vulgaris var.