Beta is a measure of the volatilityor systematic riskof a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model CAPMwhich calculates the expected return of an asset based on its beta and expected market returns.

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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.

A security's beta should only be used when a security has a high R-squared value in relation to the benchmark. The R-squared measures the percentage of a security's historical price movements that could be explained by movements in a benchmark index.

For example, a gold exchange-traded fund ETFsuch as the SPDR Gold Shares, is tied to the performance of gold bullion. When using beta to stock market beta alpha the degree of systematic risk, a security with a high Stock market beta alpha value, in relation to its benchmark, would exchange rate nz to aust the accuracy of the beta measurement.

Looking for the beta of a specific stock? Find out which brokers offer the best research tools here. A beta of 1 indicates that the security's price moves with the market. A beta of less than 1 means that the security is theoretically less volatile than the market.

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A beta of greater than 1 indicates that the security's price is theoretically more volatile than the market. For example, if a stock's beta is 1. Conversely, if an ETF's beta is 0. Many utilities stocks have a beta of less than 1.

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Conversely, most high-tech, Nasdaq-based stocks work from home playmobil malta a beta of greater than 1, offering the possibility of a higher rate of return, but also posing more risk.

For example, as of May 31,the PowerShares QQQ, an ETF tracking the Nasdaq Index, has a trailing year beta of 1.

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Test your beta knowledge and read more here: Know the Risk and Calculating Beta: Portfolio Math for the Average Investor. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

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