Beta Stock Market Definition. In the stock market, the word or greek letter beta is used as a measurement of the riskiness or volatility of a particular investment relative to the market as a whole. Beta is a measure of an investment's volatility compared to the market as a whole.
The higher the negative number, the more volatile the stock. It also indicates how volatile the asset is. However, unlike a beta of less than 1, this means a stock is more volatile (i.e.
The Tendency Of The Stock Is To Move In The Opposite Direction As The Market.
Stocks or funds that gain more than the general market in bull markets and lose more in bear markets have betas of greater than 1.0. It is a component of capital asset pricing model (capm) capital asset pricing model (capm) the capital asset pricing model (capm) defines the. The beta of any index e.g nse was considered 1.
The Overall Stock Market Is Said To Have A Beta Of 1.0, So Companies With A Beta Of 1.0 Should Be Expected To Provide Returns At An Identical Rate To The Overall Stock Market, On Average.
Beta is represented as a number. The higher the negative number, the more volatile the stock. Beta is the key factor used in the capital asset price model (capm) which is a model that measures the return.
Beta = Covariance Of A Stock’s Return With Market’s Return / Market Variance How To Calculate Beta (Example:
A stock with a beta of 1.0 will tend to move higher and lower in lockstep with the overall market. Beta is a measure of volatility associated with a stock or investment portfolio, indicating the degree of fluctuations in comparison to the overall stock market. Beta is a statistical measure of a stock’s volatility that may in turn be used to determine how volatile a stock is in comparison to the rest of the market.
Say Your Benchmark, Or The Market To Which You’re Comparing A Stock, Is The S&P 500.
Beta of less than 0 (i.e. However, this could also mean it has the potential for stronger returns. Market beta is, by definition, equal to 1.0 (or 100%).
Thus, Beta Is A Useful Measure Of The Contribution Of An Individual Asset To The Risk Of The Market Portfolio When It Is Added In Small Quantity.
The beta in finance is a financial metric that measures how sensitive is the stock price concerning the change in the market price (index). All share market instruments have a corresponding stock beta, evaluated against the potential risk and return parameters as per market performance and underlying strength of an issuing company. The beta is used for measuring the systematic risks associated with the specific investment.
