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In finance, the beta (β or market beta or beta coefficient) is a statistic that measures the expected increase or decrease of an individual stock price in proportion to movements of the stock market as a whole. Beta can be used to indicate the contribution of an individual asset to the market risk of a portfolio when it is
To calculate beta, investors divide the covariance of an individual stock (say, Apple) with the overall market, often represented by the Standard & Poor’s 500 Index, by the variance of the ...
In financial economics, finance, and accounting, the earnings response coefficient, or ERC, is the estimated relationship between equity returns and the unexpected portion of (i.e., new information in) companies' earnings announcements.
An estimation of the CAPM and the security market line (purple) for the Dow Jones Industrial Average over 3 years for monthly data.. In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio.
The term () represents the movement of the market modified by the stock's beta, while represents the unsystematic risk of the security due to firm-specific factors. Macroeconomic events, such as changes in interest rates or the cost of labor, causes the systematic risk that affects the returns of all stocks, and the firm-specific events are the ...
Return calculations should be based on market value, not cost. Total returns should be used. Returns should be time-weighted. Performance measurement should include both return and risk. Funds should be classified based on investment objectives. The report also suggested that portfolios should be compared with various sector returns. [3]
Beta measures how volatile a stock is in relation to the broader stock market over time. A stock with a high beta indicates it's more volatile than the overall market and can react with dramatic ...
A measure of the factors influencing an investment's volatility is the beta. The beta is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. A beta below 1 can indicate either an investment with lower volatility than the market, or a volatile investment whose price movements are not ...