Investor Glossary-betaInvestor Glossary-betaInvestor Glossary-betaInvestor Glossary-betaInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Beta

The HTML to link to this page
 

Beta, the second Greek letter, is used by investors to mean the volatility of any stock, mutual or hedge fund, or portfolio relative to its market. Beta, like alpha, is a risk-adjusted measure relative or benchmark. Like alpha, beta has origins in CAPM and Modern Portfolio Theory where the market return of a portfolio is compared to a "risk free" market rate or benchmark. Arbitrage Pricing Theory (APT), which uses multiple betas, models a corresponding beta for each APT market risk factor. Statistical software packages are available to calculate beta, and investment advisers sometimes keep a beta book where they can look up the beta of an individual stock, sector, mutual fund or market index and compare it to the beta of a stock market index for the same period. A beta of 1.0 means a stock's risk is the same as the S&P 500 Index, a beta of 2.0 means a stock's risk is above the market's. Remember: risk and return are a trade-off and low beta stocks may produce a low return as well as lower risk.



Rate this beta definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: current ratio, quality assurance, labor relations, Key Rate Duration, 1031 exchange, APR, 1035 exchange, open position, LIBOR, phantom income, minority interest, retained earnings, option premium, deferred revenue, class C shares, balance sheet, stock market close, stock split, irrevocable trust, margin rate, average price per share, cancelled check, in escrow, risk management, inflation, FTSE, dividends payable, command economy, required rate of return, Zero Cost Collar, ex-dividend, implied volatility, limit order, 144a, debt service coverage, reverse mortgage, diluted share, wholly-owned subsidiary, per diem, real GDP, covered put, EBITDA, 401a, liquidity ratio, FICO score, ex-dividend date, annual return, VIX, deferred tax


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use