STOCK BETA

-


Beta is a measure of the volatility or systematic risk of a security or portfolio in comparison to the market as a whole. It is also known as the beta coefficient. Beta is important because it measures the risk of an investment that cannot be reduced by diversification.

The market by default has a beta measurement of 1.0. Individual stocks are ranked according to how they differ from the market baseline. If a stock swings more than the market baseline, then it has a higher beta. If it swings less, then it has lower beta.

Beta is useful for determining whether the risk is worth the potential return on an investment. Higher-beta stocks are riskier, but typically, they have the chance for greater return than lower-beta,lower-risk stocks. For example, a stock with a beta of 1.75 will offer 1.75 times the typical market return.

Above all, these are few things one should keep in mind when evaluating beta.
* Beta measures co-movement, not volatility 
* Beta levels can change over time 
* Beta is not necessarily a complete and comprehensive measure of risk.

Investdata Academy

Comments

Post a Comment

Popular posts from this blog

Wherever You are NOW is Your Decision

-
Image
                                        Photo credit: entrepreneurfail According to research, very few people are successful at anything at first. I included. The reason only a tiny percentage of the population achieves any significant success or wealth through stock is that few are willing to go through the process of what it takes to achieve in the stock market, and there is no shortcut. In fact, everybody has to go through four levels of learning every single time, and often, in the process - fail, regroup and begin again. Most people blame others like government policies, currency fluctuation, political instability, the election for stopping their progress, but in truth, there's only one person who can put on the parking break and that person is YOU. Furthermore, many people drive around with the break on without knowing it, or once awareness arrives, don't know how to lift their foot off of it. That is why I have been organizing seminars and making them avail
Read more