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#WHAT IS FACEBOOK BETA FOR FREE#
Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence. We are an independent, advertising-supported comparison service. What to do when you lose your 401(k) match Should you accept an early retirement offer? However, in recent years, there has been a lively debate about the validity of assigning and using a beta value as an accurate predictor of stock performance.How much should you contribute to your 401(k)? Betas as low as 0.5 and as high as 4 are fairly common, depending on the sector and size of the company. But a stock with a beta lower than 1 would be expected to be more stable in price and move less. Under the same market conditions, however, a stock with a beta of 1.5 would move 3% (2% increase x 1.5 beta = 0.03, or 3%). That means if the S&P 500 moves 2% in either direction, a stock with a beta of 1 would also move 2%. The higher the beta, the more sharply the value of the investment can be expected to fluctuate in relation to a market index.įor example, Standard & Poor's 500 Index (S&P 500) has a beta coefficient (or base) of 1. Beta.īeta is a measure of an investment's relative volatility. Copyright © 2003 by Houghton Mifflin Company. Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. It is possible for a security to have a zero beta and higher volatility than the market. Also, note that the beta is a measure of co-movement, not volatility. betas may be greater for down moves in the market rather than up moves) (3) the estimated beta will be biased if the security does not frequently trade (4) the beta is not necessarily a complete measure of risk (you may need multiple betas). When using beta, there are a number of issues that you need to be aware of: (1) betas may change through time (2) betas may be different depending on the direction of the market (i.e. According to asset pricing theory, beta represents the type of risk, systematic risk, that cannot be diversified away. Roughly speaking, a security with a beta of 1.5, will have move, on average, 1.5 times the market return. The measure of an asset's risk in relation to the market (for example, the S&P500) or to an alternative benchmark or factors.