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Beta
What does it mean?
A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
Also known as "beta coefficient".
About Beta...
Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.
Many utilities stocks have a beta of less than 1. Conversely, most high-tech Nasdaq-based stocks have a beta of greater than 1, offering the possibility of a higher rate of return, but also posing more risk.
Notes and references
- http://www.investopedia.com/terms/b/beta.asp
See also
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