Definition: Beta is a numeric value that measures the fluctuations of a stock to changes in the overall stock market. Description: Beta measures the responsiveness of a stock’s price to changes in the overall stock market.
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What does beta value mean?
Beta is a measure of a stock’s volatility in relation to the overall market.A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock’s beta is less than 1.0.
What does a beta value of 1 mean?
A beta of 1 indicates that the security’s price tends to move with the market. A beta greater than 1 indicates that the security’s price tends to be more volatile than the market. A beta of less than 1 means it tends to be less volatile than the market.
What does a beta of 0.8 mean?
Beta is a score that measures a stock’s volatility or risk against the rest of the market.For example, a stock with a beta of 0.8 would be expected to return 80% as much as the overall market. A stock with a beta of 1.2 would move 20% more than the overall market. There is more than one way to calculate betas.
How is beta calculated?
A security’s beta is calculated by dividing the product of the covariance of the security’s returns and the market’s returns by the variance of the market’s returns over a specified period. The beta calculation is used to help investors understand whether a stock moves in the same direction as the rest of the market.
What does a beta of 0 mean?
A zero-beta portfolio is a portfolio constructed to have zero systematic risk, or in other words, a beta of zero.Such a portfolio would have zero correlation with market movements, given that its expected return equals the risk-free rate or a relatively low rate of return compared to higher-beta portfolios.
What does a beta of 1.5 mean?
Roughly speaking, a security with a beta of 1.5, will have move, on average, 1.5 times the market return.[More precisely, that stock’s excess return (over and above a short-term money market rate) is expected to move 1.5 times the market excess return).]
What does a beta of 2.5 mean?
Beta, also known as the beta coefficient, measures how the expected return of a stock is correlated to the performance of the stock market as a whole.A positive beta, such as a one or two, means that the stock usually tracks the market in general.
Is a negative beta risky?
Generally, stocks that have a high or positive beta coefficient are riskier and more volatile than those with a lower beta value. This does not mean, however, that stocks with a negative beta coefficient have no inherent risks.
What is the beta of gold?
zero-beta asset
Gold shows the characteristics of a zero-beta asset. It has approximately the same mean return as a Treasury Bill and bears no market risk. Silver also bears no market risk but has returns inferior to Treasury Bills.
What does a beta of 1.1 mean?
Each tenth of a point represents the percentage of volatility. For example, if a stock beta value is 1.1, then it is considered to have a 10 percent greater volatility than the market.
What is considered a high beta?
A high-beta stock, quite simply, is a stock that has been much more volatile than the index it’s being measured against. A stock with a beta above 2 — meaning that the stock will typically move twice as much as the market does — is generally considered a high-beta stock.
What does a positive beta mean?
A positive beta value indicates that stocks generally move in the same direction with that of the market and the vice versa.
What does β mean in statistics?
Beta (β) refers to the probability of Type II error in a statistical hypothesis test.In that system, there is an initial presumption of innocence (null hypothesis), and evidence is presented in order to reach a decision to convict (reject the null hypothesis) or acquit (fail to reject the null).
What is the beta of equity?
Levered beta, also known as equity beta or stock beta, is the volatility of returns for a stock, taking into account the impact of the company’s leverage from its capital structure. It compares the volatility (risk) of a levered company to the risk of the market.
Is beta systematic risk?
Beta is the standard CAPM measure of systematic risk. It gauges the tendency of the return of a security to move in parallel with the return of the stock market as a whole. One way to think of beta is as a gauge of a security’s volatility relative to the market’s volatility.
What is a 5 year beta?
Beta (5 Year) – A ratio that measures the risk or volatility of a company’s share price in comparison to the market as a whole.
What is beta measured against?
Beta is a statistical measure of the volatility of a stock versus the overall market. A beta above 1 means a stock is more volatile than the overall market. A beta below 1 means a stock is less volatile than the overall market. The S&P 500, Dow Jones Industrial Average, and Nasdaq 100 are frequently used beta measures.
What is a good EPS for a stock?
Stocks with an 80 or higher rating have the best chance of success. However, companies can boost their EPS figures through stock buybacks that reduce the number of outstanding shares.
What does a beta of 0.7 mean?
A fund with a beta of 0.7 has experienced gains and losses that are 70% of the benchmark’s changes. A beta of 1.3 means the total return is likely to move up or down 30% more than the index.
What does a beta of 1.01 mean?
A beta of 1 means that the stock moves in line with the broader market.A beta greater than 1 means the stock moves more or is more volatile than the broader market. The higher the beta, the more return is required by investors to compensate for the additional risk.