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Beta

By Pinyo • Aug 27th, 2008 • Category: B

Beta is a a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. A beta of 1 means that the security’s price will move with the market. A beta of less than 1 means that the security will have less price fluctuation than the market. Finally, a beta of greater than 1 means that the security’s price will be move more than the market.

For example, if a stock’s beta is 1.5 and the market drops by 10%, in theory, the security will drop by 15%.

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