THE PROS AND CONS OF BETA

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These are a few advantages and disadvantages of using Beta.

ADVANTAGES 
* Beta is a useful measurement for CAPM
* It is a straightforward, quantifiable measure of risk 
* knowing risk levels is helpful when investing and determining cost of equity 

DISADVANTAGES 
* Beta looks backwards, which makes it less useful for predicting future stock movements 
* Beta does not incorporate or account for new information 
* For long-term investors, beta is not as useful, since it can change greatly over time.

In the meantime, beta is a useful tool for determining short-term risk and for calculating quantifiable measures of volatility to aid in finding equity costs. Though, it has its pros and cons like any other investing tools,but can be a great way to establish the stability and the volatility in ones portfolio.

Investdata Academy

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