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 ?
Beta-blockers remain effective for preventing death in heart failure with reduced ejection fraction (HFrEF) and sinus rhythm, even in patients with moderate or moderately-severe kidney dysfunction, according to late breaking research presented in a Hot Line Session today at ESC Congress 2019 together with the World Congress of Cardiology(1).
In addition, beta-blockers have been shown to slow the progression of heart failure, improve its severity and reduce the risk of arrhythmias.
"It would be premature to recommend the use of beta-blockers for these patients, until we conduct prospective clinical studies said Dr.
Patients who used beta-blockers had higher SBP and DBP and more acceptable MAP values compared with patients who did not use beta-blockers.
Another 2013 meta-analysis of 8 RCTs with 4563 adult patients 18 years or older with systolic heart failure compared carvedilol with the beta-l-selective beta-blockers atenolol, bisoprolol, nebivolol, and metoprolol.
Beta-blockers are used to treat migraine as they counteract the effects of noradrenalin on blood vessels in the head.
Nagai, "Beta-blocker prescription among Japanese cardiologists and its effect on various outcomes," Circulation Journal, vol.
Beta-blocker therapy was initiated within one month of surgery in 12 (6.2%) patients in the first cohort and six (5.8%) in the second cohort, P=0.89; within seven days of surgery in six (1.5%) patients in the first cohort and three (1.2%) in the second cohort, P=0.78; and postoperatively in 26 (13%) patients in the first cohort and 16 (13%) in the second cohort, P=0.97.
Beta-blockers are commonly used in the treatment of hypertension (high blood pressure) to help reduce the risk of stroke and cardiovascular disease.
In fact, after controlling for baseline depression, researchers found that beta-blocker users demonstrated significantly lower BDI scores 3 months post-MI than nonusers.
But some research has found that older beta-blockers, especially the widely used atenolol (Tenormin), are associated with an increased risk of developing type 2 diabetes or exacerbating the disease in existing diabetics.