|Glossary Term: BETA|
Definition(s) for BETA:
1. ) A mathematicall measure that shows a fund's volatility relative to the S & P 500(r) Index over the last 36 months. By definition, the beta of the S & P 500 is 1.0. A high beta (greater than 1.0) indicates moderate or high price volatility. A beta of 1.5 forecasts a 1.5% change in the return on an asset for every 1% change in the return of the market. High-beta stocks are best to own in a strong bull market but are worst to own in a bear market.
2. ) Coefficient measuring a stock's relative volatility. The beta is a covariance of the stock in relation to the rest of the stock market. The Standard & Poor's 500 Stock Index has a beta coefficient of 1. Any stock with a higher beta is more volatile than the market, and any with a lower beta can be expected to rise and fall more slowly than the market. A conservative investor whose main concern is preservation of capital should focus on stocks with low betas, whereas one willing to take high risks in an effort to earn high rewards should look for high-beta stocks.
3. ) A measure of how a stock's movement correlates to the movement of the entire stock market. The Beta is not the same as volatility. See also Standard Deviation and volatility.
4. ) A measure of how closely the movement of an individual stock tracks the movement of the entire stock market.
BETA-ADJUSTED GAP, BETA PRODUCT, BETA EQUATION (SECURITY), COUNTRY BETA, FOREIGN MARKET BETA, FUNDAMENTAL BETA, LEVERAGED BETA, PORTFOLIO BETA, UNLEVERAGED BETA, ZERO-BETA PORTFOLIO, NYSE BETA INDEX, BETA COEFFICIENT