What does a beta of 1.3 mean?

Definition: Beta is a numeric value that measures the fluctuations of a stock to changes in the overall stock market. For example, if a stock's beta value is 1.3, it means, theoretically this stock is 30% more volatile than the market.

Also to know is, what does a beta of 1.5 mean?

A beta of 1.5 means that a stock's excess return is expected to move 1.5 times the market excess returns. E.g., if market excess return is 10%, then we expect, on average, the stock return to be 15%.

Also, what is a good beta ratio? A beta that is greater than 1.0 indicates that the security's price is theoretically more volatile than the market. For example, if a stock's beta is 1.2, it is assumed to be 20% more volatile than the market. Technology stocks and small caps tend to have higher betas than the market benchmark.

Accordingly, what does it mean when beta is 1?

A beta of 1 indicates that the security's price tends to move with the market. A beta greater than 1 indicates that the security's price tends to be more volatile than the market. A beta of less than 1 means it tends to be less volatile than the market. Many utility sector stocks have a beta of less than 1.

What does a beta of 0.7 mean?

A negative beta means that an investment moves in the opposite direction as the overall stock market. For example, Johnson & Johnson has a beta of 0.7, meaning that it is less volatile than the overall market, while Amazon.com has a beta of 1.6, indicating that investors should expect higher volatility.

What is a good beta score?

A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks are supposed to be riskier but provide a potential for higher returns; low-beta stocks pose less risk but also lower returns.

What does a negative beta mean?

A negative beta correlation means an investment moves in the opposite direction from the stock market. When the market rises, a negative-beta investment generally falls. When the market falls, the negative-beta investment will tend to rise. Negative beta is an unusual concept, as it pertains to the stock market.

What does beta stand for?

BETA

Acronym	Definition
BETA	Business Education Technology Alliance
BETA	Business Excellence through Action (various organizations)
BETA	Baltimore's Extraordinary Technology Advocate (Award)
BETA	Beta Email Tracking Application (email hoax)

What is a good Alpha?

How do they work? A positive alpha of 1.0 means the fund or stock has outperformed its benchmark index by 1 percent. A similar negative alpha of 1.0 would indicate an underperformance of 1 percent. A beta of less than 1 means that the security will be less volatile than the market.

What does a beta of 0 mean?

A zero-beta portfolio is a portfolio constructed to have zero systematic risk or, in other words, a beta of zero. Such a portfolio would have zero correlation with market movements, given that its expected return equals the risk-free rate or a relatively low rate of return compared to higher-beta portfolios.

How is beta measured?

The beta coefficient is calculated by dividing the covariance of the stock return versus the market return by the variance of the market. Beta is used in the calculation of the capital asset pricing model (CAPM). The market against which to measure beta is often represented by a stock index.

How do you interpret Beta?

The beta coefficient can be interpreted as follows:

β =1 exactly as volatile as the market.
β >1 more volatile than the market.
β <1>0 less volatile than the market.
β =0 uncorrelated to the market.
β <0 negatively correlated to the market.

What is the formula for calculating beta?

The formula for calculating beta is the covariance of the return of an asset with the return of the benchmark divided by the variance of the return of the benchmark over a certain period.

What causes beta to change?

If a company increases its debt to the point where its levered beta is greater than 1, the company's stock is more volatile than the market. If a company decreases its debt to the point where its levered beta is less than 1, the company's stock is less volatile than the market.

What does beta mean in statistics?

StATS: What is a beta level? The beta level (often simply called beta) is the probability of making a Type II error (accepting the null hypothesis when the null hypothesis is false). It is directly related to power, the probability of rejecting the null hypothesis when the null hypothesis is false.

What does beta mean in a wolf pack?

Betas: The Beta rank is the highest ranking wolf in the pack just below the Alpha couple. The Beta wolf is essentially the second-in-command of the wolf pack and beyond this most significant point, the Beta is otherwise similar to wolves in the High rank.

Is beta a good measure of risk?

Beta is the correlation of a company's stock price to that of the overall market. Beta is used in the CAPM to estimate a company's cost of capital, hence determining its market valuation. The value of a stock is therefore based on the assumption that beta is a reliable measure of risk, in the long term.

Does Beta change over time?

A stocks Beta value does not change much. unless there is a large discontinuity in the stock price. The firm's stock beta changes over time. The firm's beta is the sensitivity and responsiveness of its returns to returns on the market index.

What is a good portfolio beta?

For example, a portfolio with an overall beta of +0.7 would be expected to earn 70% of the market's return under normal circumstances. Portfolios, however, can also have betas greater than 1.0, such that a portfolio with a beta of +1.25 would be expected to earn 125% of the market's return and so on.

What is alpha and beta?

Alpha is the excess return on an investment relative to the return on a benchmark index. Beta is the measure of relative volatility. Alpha and beta are both risk ratios that calculate, compare, and predict returns.

Can CAPM be negative?

1 Answer. The negative value may be correct. Stock A a positive expected return, B has a 0% expected return, and the risk free rate is 0%. By contradiction, the sum of the expected excess returns of two perfectly negatively correlated stocks with the same standard deviation must be zero.