When you strip away the fancy terminology, a stock’s beta (β) is simply a measure of how risky that stock is. Beta analysis can be a useful tool for building a balanced portfolio, although it has limitations. What does beta mean in stocks? Beta is a way of measuring how volatile an...
Beta allows for a good comparison between an individual stock and a market-trackingindex fund, but it doesn’t offer a complete portrait of a stock’s risk. Instead, it’s a look at its level of volatility, and it’s important to note that volatility can be good and bad. Investors are...
Ever since people have invested their money into stocks they have been interested in the forces which drive stock returns. First, an analysis of these forces helps the investor to understand why stock returns have developed in a certain way during the past. Second, it might help him to make...
Beta (Ba): Now, you need to determine the beta (Ba) of ABC Inc. Beta measures how volatile a stock is compared to the overall market. If ABC Inc. has a beta of 1, it moves in line with the market. If it has a beta greater than 1, it’s riskier than the market; if it’s...
Answer to: Assume that the risk-free rate is 3% and the required return on the market is 10%. What is the required rate of return on a stock with a...
If the risk-free rate is 2%, and the market risk premium is 6%, what is the required rate of return on a stock with a beta of 2? A) 4% B) 8% C) 12% D) 14% Required Rate Of Return: The required rate of...
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What Are the Four Levels of Stock? Personal Finance What Does it Mean When the Stock Market Is Down? Stocks that have a beta value of exactly one means that the stock price moves in lockstep with the market. The disadvantage is that stocks with a beta of one don't present the investor...
Beta indicates how volatile a stock's price has been in comparison to the market as a whole. A high alpha is always good. A high beta may be preferred by an investor in growth stocks but shunned by investors who seek steady returns and lower risk. ...
Beta Greater than 1:A beta greater than 1.0 indicates that the security's price is theoretically more volatile than the market. If a stock's beta is 1.2, it is assumed to be 20% more volatile than the market. Technology stocks tend to have higher betas than the market benchmark. Adding...