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Beta is the hedge ratio of an investment with respect to the stock market. For example, to hedge out the market-risk of a stock with a market beta of 2.0, an investor would short $2,000 in the stock market for every $1,000 invested in the stock. Thus insured, movements of the overall stock market no longer influence the combined position on ...
For example, if a stock increased by 5% because of some news that affected the stock price, but the average market only increased by 3% and the stock has a beta of 1, then the abnormal return was 2% (5% - 3% = 2%). If the market average performs better (after adjusting for beta) than the individual stock, then the abnormal return will be negative.
In this case, a negative beta just a hair under 0 doesn't have any more significance than a positive 0.01 beta would. Ferrellgas will move with gas prices more than with the broad market. Agnico ...
In investing, downside beta is the beta that measures a stock's association with the overall stock market only on days when the market’s return is negative. Downside beta was first proposed by Roy 1952 [ 1 ] and then popularized in an investment book by Markowitz (1959) .
For example, if the market is making a big move 20% higher, a stock with a beta of 1.5 will tend to trade up 30%. In this way, an investor can maximize gains in a bullish market by picking up ...
Continue reading → The post How to Calculate the Beta of a Portfolio appeared first on SmartAsset Blog. Investors, whether beginner or seasoned professionals, all have a threshold for risk. Some ...
The relationship between stock returns to profit to determine the extent of the response that occurs to as the Earnings Response Coefficient (ERC). Some studies reveal there are four factors that affect Earnings Response Coefficient (ERC), namely : beta, capital structure, persistence and growth. [citation needed]
Beta allows for a good comparison between an individual stock and a market-tracking index fund, but it doesn’t offer a complete portrait of a stock’s risk. Instead, it’s a look at its level ...