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 ?
Bioactive inhibin contains an alpha and a beta subunit.
21) The combination of two markers such as AFP and hCG, or the free beta subunit, yields substantially more clinically useful data.
While some studies have reported a higher detection rate for the free beta subunit, not all findings are in agreement.
17) If the beta subunit rather than intact HCG is measured as part of a triple screen, sensitivity for detection of DS pregnancies may approach 85 percent.
hCGn free beta subunit (hCG(3n; preparation 834) was separated from CR 129 hCG free beta subunit (hCG(3) by reversed-phase chromatography on a Vydac C4 column with 1 mL/L trifuoroacetic acid (TFA) in distilled water as buffer A and 1 mL/L TFA in acetonitrile as buffer B (10).
The hLH (AFP-8270B) and the hLH free beta subunit (AFP-3282) were kindly provided by the National Hormone and Pituitary Program, National Institute of Diabetes and Digestive and Kidney Diseases.
The analytes tested for potential cross-reaction with the normal-pregnancy hCGn mAbs included hCG, hCG(3, hCG[beta]n, hCG[beta]cf, hLH, the hLH free beta subunit, and the hLH beta core fragment.
The hLH (AFP-8270B) and hLH free beta subunit (AFP-3282) were kindly provided by the National Hormone and Pituitary Program, National Institute of Diabetes and Digestive and Kidney Diseases.
Development of highly sensitive immunoassays to measure human chorionic gonadotropin, its beta subunit, and beta core fragment in the urine: application to malignancies.
The integrated value of the hCG[beta] peak was compared with the total peaks of the alpha and beta subunits (nicked and non-nicked); it was then calculated that this preparation contained ~20% non-nicked hCG[beta].