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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
If a stock has a beta of 1.2, it might be considered 20 percent riskier than the benchmark and therefore should compensate investors with a higher expected return. If the index returned 10 percent ...
Pros and cons of using beta Pros. History can hold important lessons: Beta uses a sizable chunk of data. Typically reflecting at least 36 months of measurements, beta gives you an idea of how the ...
The average investor may not be familiar with what beta means, but they are no doubt fully aware of what it represents. Although there are different types of risk in the market, a stock's beta...
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 ...
If the Beta of a stock is 1.5 then a 10% increase in the market will translate to a 15% increase in the stock price and if the beta of a stock is 0.5 a 10% market increase will translate to a 5% stock price increase and likewise with decreases in the market. This beta is generally found via statistical analysis of the share price history of a ...
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 ...
2. Beta: The measurement of how a company's stock price reacts to a change in the market. A beta higher than 1 means that a change in share price is exaggerated compared to the rest of shares in the same market. A beta less than 1 means that the share is stable and not very responsive to changes in the market.