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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 ...
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
How to calculate beta. Beta is calculated by taking the covariance between the return of an asset and the return of the market and dividing it by the variance of the market. The measure is ...
In probability theory and statistics, the beta distribution is a family of continuous probability distributions defined on the interval [0, 1] or (0, 1) in terms of two positive parameters, denoted by alpha (α) and beta (β), that appear as exponents of the variable and its complement to 1, respectively, and control the shape of the distribution.
The SML enables us to calculate the reward-to-risk ratio for any security in relation to that of the overall market. Therefore, when the expected rate of return for any security is deflated by its beta coefficient, the reward-to-risk ratio for any individual security in the market is equal to the market reward-to-risk ratio, thus:
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 ...
For a Type II error, it is shown as β (beta) and is 1 minus the power or 1 minus the sensitivity of the test. [ citation needed ] Statistical and econometric modelling
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