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A US Treasury bill has a beta of 0 while the overall market has a beta of what?
Wiki User
∙ 14y ago
Beta is the measure of a security's volatility compared to the volatility of the market as a whole. Therefore, the market as a whole has a beta of 1.
Wiki User
∙ 14y ago
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What would make a firm's beta increase?
The beta of a firm's stock is dependent on the volatility of the stock relative to the overall market. So if the stock's volatility increased relative to the overall market, it's beta would increase as well.
What does beta mean in reference to mutual funds?
AnswerbetaA quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market, usually the S&P 500. Specifically, the performance the stock, fund or portfolio has experienced in the last 5 years as the S&P moved 1% up or down. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile.general market fluctuations, which affect all the securities present in the market, called market risk or systematic risk,second, fluctuations due to specific securities present in the portfolio of the fund, called unsystematic risk.The Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns of the fund.Systematic risk, on the other hand, is measured in terms of Beta, which represents fluctuations in the NAV of the fund vis-Ã -vis market. The more responsive the NAV of a mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a mutual fund with the returns in the market. While unsystematic risk can be diversified through investments in a number of instruments, systematic risk can not.Also read http://www.mutualfundplan.com/2008/08/measurement-of-risk-return-in-mutual.html for more details about various Risk measurement tools..
Risk free rate is 5 and the market risk premium is 6 What is the expected return for the overall stock market What is the required rate of return on a stock that has a beta of 1.2?
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
The CAPM implies that investors require a higher return to hold highly volatile securities?
The CAPM relates the expected return on a security to that of the overall market portfolio. A highly volatile security will have a high covariance with the market portfolio. Since beta equals the covariance of the security with the market portfolio divided by the variance of the market portfolio, the result is a high value of beta. When this high value of beta is plugged into the CAPM formula, all else not changed, the required return on the security (ra) is going to increase, implying investors require a higher return to hold a highly volatile security. t
If the required rate of return is 11 the risk free rate is 7 and the market risk premium is 4 what is the beta coefficient?
the beta is 1 the beta is 1
What would make a firm's beta increase?
The beta of a firm's stock is dependent on the volatility of the stock relative to the overall market. So if the stock's volatility increased relative to the overall market, it's beta would increase as well.
The beta of a risk-free security is----and the beta of the overall market is aoo b 01 c10 d11 einfinite1?
B 01
What is a BETA number?
A beta number is a calculayion that helps to measure the level of risk in investing a stock by comparing its growth with that of the overall market.
What is the beta of a US Treasury bill?
US Treasury bill is risk-free, hence its beta equal 0 (zero)
What English word has 'Beta' in it?
betas. it relates the responsiveness of the returns on individual securities to variations in the return on the overall market portfolio
What is the beta of a Aggressive portfolio?
The beta of an Aggressive portfolio is typically higher than 1, indicating that the portfolio is expected to be more volatile than the overall market. This means that when the market moves up or down, the Aggressive portfolio is likely to experience larger price fluctuations. Investors in Aggressive portfolios are seeking higher returns but also accept higher risk.
What does BETA indicate?
Beta is a measure of a stock's volatility. The price of a stock with a beta of 1.0 rises and falls on average with the overall market. A beta greater than 1.0 could mean larger prices fluctuations, and a beta of less than 1.0 indicates a more tame stock. For example, if Company A has a beta of 1.2 and the market goes up 10% in a given period of time then Company A should increase about 12% in value. If the market falls 20% then Company A's stock price should drop 24%.
What will happen to the expected return on a stock with a beta of 1.5 and a market risk premium of 9 percent if the Treasury bill yield increases from 3 percent to 5 percent?
2.0%
What is the reason behind when the value of beta is taken negative?
The negative sign in beta represents the inverse relationship between the return on an asset and the return on the overall market. A negative beta suggests that the asset tends to move in the opposite direction of the market, indicating that it is likely to perform well when the market declines and vice versa. This negative correlation can be valuable for diversification purposes in a portfolio.
What does beta mean in reference to mutual funds?
AnswerbetaA quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market, usually the S&P 500. Specifically, the performance the stock, fund or portfolio has experienced in the last 5 years as the S&P moved 1% up or down. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile.general market fluctuations, which affect all the securities present in the market, called market risk or systematic risk,second, fluctuations due to specific securities present in the portfolio of the fund, called unsystematic risk.The Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns of the fund.Systematic risk, on the other hand, is measured in terms of Beta, which represents fluctuations in the NAV of the fund vis-Ã -vis market. The more responsive the NAV of a mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a mutual fund with the returns in the market. While unsystematic risk can be diversified through investments in a number of instruments, systematic risk can not.Also read http://www.mutualfundplan.com/2008/08/measurement-of-risk-return-in-mutual.html for more details about various Risk measurement tools..
Beta?
In my last post I discussed an investment metric known as alpha. Alpha is a gauge of risk-adjusted returns provided by a portfolio manager. Alpha isn’t the only measure of a stock or portfolio’s risk profile. Another one is called beta. Beta measures a stock’s volatility in comparison to the overall market. A beta value of 1 is assigned to the overall market. So a stock that has a beta of one would be considered to move in lockstep with the overall market. If the market were to go up by 10%, the stock should also move by the same amount in the same direction. A stock that moves less than the overall market would have a beta less than one. A beta greater than one indicates a stock that moves in the same direction as the overall market but in more extreme swings. Beta can be a good figure to use in rule-of-thumb investment decisions but it does have one serious drawback of which investors should be aware. Beta is calculated based on historical price movements relative to the market. Because of this method of calculation it doesn’t take into account any new information about the underlying fundamentals of the company. Due to this limitation, beta should never be used in a vacuum. Remember, statistics like alpha and beta can provide guideposts to help you evaluate an investment manager or the risk of a particular stock but they shouldn’t be relied upon to replace the hard work of fundamental analysis. It is the key things going on with a company’s balance sheet and income statement that are the true underpinnings of the stock’s valuation. Keep this in mind when evaluating stocks or portfolios and you’ll be in good shape. I’m not saying that statistics like alpha and beta should be ignored; they’re great tools. Just don’t let them be the only tools you use when making investment decisions.
Risk free rate is 5 and the market risk premium is 6 What is the expected return for the overall stock market What is the required rate of return on a stock that has a beta of 1.2?
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
