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Beta (finance) Expected change in price of a stock relative to the whole market. 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 ...
By definition, the market as a whole has a beta of 1, and everything else is defined in relation to that: ... Using beta to evaluate a stock’s risk. Beta allows for a good comparison between an ...
Beta is an important measure of one type of risk, but it doesn’t encapsulate all of a stock’s risk. Stocks are shares of real-life businesses , which subjects them to the economic fortunes of ...
Capital asset pricing model. An estimation of the CAPM and the security market line (purple) for the Dow Jones Industrial Average over 3 years for monthly data. In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to ...
Outline. Business and Economics portal. Money portal. v. t. e. In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.
SABR volatility model. In mathematical finance, the SABR model is a stochastic volatility model, which attempts to capture the volatility smile in derivatives markets. The name stands for " stochastic alpha, beta, rho ", referring to the parameters of the model. The SABR model is widely used by practitioners in the financial industry ...
Low-volatility anomaly. In investing and finance, the low-volatility anomaly is the observation that low-volatility securities have higher returns than high-volatility securities in most markets studied. This is an example of a stock market anomaly since it contradicts the central prediction of many financial theories that higher returns can ...
e. In the context of operational risk, the standardized approach or standardised approach is a set of operational risk measurement techniques proposed under Basel II capital adequacy rules for banking institutions. Basel II requires all banking institutions to set aside capital for operational risk. Standardized approach falls between basic ...