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 ?
Administration of inhaled beta agonists may reverse hypoxic pulmonary vasoconstriction by beta 2 stimulation, increasing perfusion to underventilated lung regions.
The current impasse over beta agonists and ractopamine in particular poses a number of especially difficult challenges for the U.S.
Conducted by the NHLBI's Asthma Clinical Research Network, the study compared three treatment methods: doubling the dose of inhaled corticosteroids alone, supplementing a low dose of inhaled corticosteroids with a long-acting beta agonist (salmeterol), and supplementing a low dose of inhaled corticosteroids with a long-acting anticholinergic drug (tiotropium bromide).
That recommendation--to use a long-acting beta agonist (LABA) for "the shortest period of time required to achieve control of asthma symptoms and [to discontinue it], if possible, once asthma control is achieved," then use an asthma controller medication to maintain control--has raised concerns among some asthma treatment experts, who said this could be confusing for clinicians and patients.
The patients who were randomized had to meet the inclusion criteria established for the study: (a) a forced expiratory flow in 1 second (FE[V.sub.1]) between 50-85% of the predicted value after withholding their beta agonist for at least 6 hours, (b) 15% FE[V.sub.1] improvement 20-30 minutes after beta-agonist use in at least two pre-study evaluation visits, and (c) demonstrated competence using a peak flow meter and a diary card used to track asthma symptoms.
OBJECTIVE: This study evaluated whether chiropractic treatment was an alternative to long acting beta agonists in terms of improving quality of life and reducing rescue bronchodilator use.
For many of us, long acting beta agonists are still new, compared to short acting agents.
Another class of drugs, beta agonists, such as albuterol, bitolterol, metaproterenol, pirbuterol, and terbutaline, are used either when the symptoms occur or just before an activity that may cause symptoms.
Because of the phaseout of CFC propellant in beta agonists and the increased deposition seen with other HFA MDIs.
These agents work well with beta agonists as well as on their own.
The Global Initiative for Chronic Obstructive Lung Disease (GOLD) recommends long acting beta agonists be added to the treatment of patients in stage II.