To: TigerLikesRooster
Beta refers the relationship between a particular stock's price movement on a percentage basis and the price movement of the broader market. A beta of 1.00 means if the market rises 10%, the particular stock rises 10%. A beta of 1.1 means if the market rises 10%, the stock rises 11%. And vice versa for declines. Betas < 1 mean less movement than the broader market. Note that these relationships are based on past performance and may not hold looking forward. Some people don't have much faith in beta as a useful measure. Beta's can be used to measure portfolio performance. If the market went up 10% and the portfolio has a beta of 1.1, we would expect it to rise by 11%. If it actually went up 13%, then we attribute the difference of 2% (referred to as alpha) to the portfolio manager's stock picking ability.
14 posted on
11/07/2002 6:03:56 AM PST by
Soren
To: Soren
Thanks for the detailed version of beta. I have to upgrade my vocabulary.
FR is a great continuing education.
15 posted on
11/07/2002 8:44:17 AM PST by
Orion
To: Soren
Re #14
So it is relative to the market average. Thanks for your tip. My characterization of 90's as the beta-addiction is now moot, I guess.:)
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