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Username: Andrew

Rating:
Guru Stars

Asked to: Heng Kim

Date Created: 28 Mar 2018
Category 28
Tag Financial
Question What is 'Beta'?
Advice from Guru
Hello Andrew,

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which calculates the expected return of an asset based on its beta and expected market returns. Beta is also known as the beta coefficient.

Beta is calculated using regression analysis. Beta represents the tendency of a security's returns to respond to swings in the market. A security's beta is calculated by dividing the covariance the security's returns and the benchmark's returns by the variance of the benchmark's returns over a specified period.

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