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To calculate beta, investors divide the covariance of an individual stock (say, Apple) with the overall market, often represented by the Standard & Poor’s 500 Index, by the variance of the ...
To figure the expected return for an investment’s level of risk, analysts use beta, which measures an asset’s volatility and can be used to gauge risk. If a stock has a beta of 1.2, it might ...
Continue reading → The post How to Calculate the Beta of a Portfolio appeared first on SmartAsset Blog. Investors, whether beginner or seasoned professionals, all have a threshold for risk. Some ...
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
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 a well-diversified portfolio.
β, Beta, is the measure of asset sensitivity to a movement in the overall market; Beta is usually found via regression on historical data. Betas exceeding one signify more than average "riskiness" in the sense of the asset's contribution to overall portfolio risk; betas below one indicate a lower than average risk contribution.
α i is called the asset's alpha (abnormal return) β i (R M,t – R f) is a nondiversifiable or systematic risk ε i,t is the non-systematic or diversifiable, non-market or idiosyncratic risk R M,t is the return to market portfolio R f is a risk-free rate
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 ...