2007-02-02 05:10:08 · 8 answers · asked by mc060200536 1 in Business & Finance ➔ Other - Business & Finance
Beta refers to financial elasticity or correlated relative volatility, and can be referred to as a measure of the asset's sensitivity of the asset's returns to market returns, its non-diversifiable risk, its systematic risk or market risk. On an individual asset level, measuring beta can give clues to volatility and liquidity in the marketplace. On a portfolio level, measuring beta is thought to separate a manager's skill from his or her willingness to take risk.
The beta movement should be distinguished from the actual returns of the stocks. For example, a sector may be performing well and may have good prospects, but the fact that its movement does not correlate well with the broader market index may decrease its beta. However, it should not be taken as a reflection on the overall attractiveness or the loss of it for the sector, or stock as the case may be. Beta is a measure of risk and not to be confused with the attractiveness of the investment.
The beta coefficient was actually born out of linear regression analysis. It is linked to a regression analysis of the returns of a portfolio (such as a stock index) (x-axis) in a specific period versus the returns an individual asset (y-axis) in a specific year. The regression line is then called the Security Characteristic Line (SCL).
For example, in a year where the broad market or benchmark index returns 25% above the risk free rate, suppose two managers gain 50% above the risk free rate. Since this higher return is theoretically possible merely by taking a leveraged position in the broad market to double the beta so it is exactly 2.0, we would expect a skilled portfolio manager to have built the outperforming portfolio with a beta somewhat less than 2, such that the excess return not explained by the beta is positive. If one of the managers' portfolios has an average beta of 3.0, and the other's has a beta of only 1.5, then the CAPM simply states that the extra return of the first manager is not sufficient to compensate us for that manager's risk, whereas the second manager has done more than expected given the risk. Whether investors can expect the second manager to duplicate that performance in future periods is of course a different question.
2007-02-02 06:02:27 · answer #1 · answered by MSC 5 · 1⤊ 0⤋
Beta is a rough measure of how much a given stock moves in response to a move in the market. For example, a beta of 1.2 implies that if the market is up 10% the stock will be up 1.2x10% = 12%. Beta can also be negative for certain stocks or sectors that tend to move in the opposite direction of the general market.
2007-02-02 05:16:46 · answer #2 · answered by Jon G 1 · 2⤊ 0⤋
It's a measure of volatility, taken as the ratio of variance of the stock price versus variance of its respective index (ie, S&P 500, Lehmann's 1000, etc).
Beta isn't a perfect measure, but it's the easiest of the more descriptive and has found common acceptance among most investors. It's also one that requires very little actual statistical knowledge to use for technical analysis. Whether technical analysis will get you above-average returns is another story....
2007-02-02 06:01:20 · answer #3 · answered by Veritatum17 6 · 2⤊ 0⤋
The 2nd Transaction Type Of Any Transaction List For A Particular Traded Company
2007-02-02 05:13:12 · answer #4 · answered by Spaghetti MY 5 · 0⤊ 0⤋
It is a calculation related to the variance of the stock's value - if it goes up and down a lot, the beta will be higher.
2007-02-02 05:14:17 · answer #5 · answered by mikeleibo 2 · 0⤊ 0⤋
ham,burgers. oh and paperback copies of Bridge to Teribethiea. Thats definatley beta.
2007-02-02 05:12:37 · answer #6 · answered by Anonymous · 0⤊ 1⤋
Fish
2007-02-02 05:12:32 · answer #7 · answered by Anonymous · 0⤊ 1⤋
I Beta can stuff more hot pockets in my mouth than you!
2007-02-02 05:12:33 · answer #8 · answered by Anonymous · 0⤊ 1⤋