Difference between revisions of "Beta"
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(Created page with "The '''''Beta''''' measures the amount that investors expect the stock price to change for each additional 1% change in the market. The average beta of all stocks is 1.0. A st...") |
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Latest revision as of 19:23, 27 August 2020
The Beta measures the amount that investors expect the stock price to change for each additional 1% change in the market. The average beta of all stocks is 1.0. A stock with a beta lower than 1.0 is unusually insensitive to market movements. A stock with a beta > 1.0 is above average sensitive to market movements.
The formula for beta is:
=
Where is the Covariance@math between the stocks returns and the market returns and is the variance of returns in the market.