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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
By definition, the market as a whole has a beta of 1, and everything else is defined in relation to that: Stocks with a value greater than 1 are more volatile than the market, ...
For example, if the market is making a big move 20% higher, a stock with a beta of 1.5 will tend to trade up 30%. In this way, an investor can maximize gains in a bullish market by picking up ...
Stock market indices are frequently used as local proxies for the market—and in that case (by definition) have a beta of one. An investor in a large, diversified portfolio (such as a mutual fund designed to track the total market), therefore, expects performance in line with the market.
But if high-beta stocks are risky and low-beta. Investors always want great returns with minimal risk. One way that stock analysts measure risk is by looking at what's known as beta values, with ...
The beta of a security is the measure of a security's volatility relative to the broader market to understand its historical share price movement compared to the market. [12] If the beta of a stock is 1.0 then a 10% increase in the market will translate to a 10% increase in stock price.
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 ...
High beta stocks are a favorite of many investors who aren't afraid of taking big risks in order to earn jaw-dropping returns. So what exactly are high.