This is a very deep subject. In a few simple paragraphs.
* Beta is a measure of Market Risk - how sensitive a stock is to market movements.
For individual stocks a beta greater than 1 have "greater" movement than market and those between 0 and one have less. Think of it as follows - if an individual stock has a beta of 1.5 and if the future looks like the past then ON AVERAGE when the market rises an extra 1% the stock will rise 1.5%. If the market falls 2% then the stock falls 3%.
Beta is core to figuring out expected stock returns based on determining what part of the return is overall market and what would be the abnormal return.
Lots of sites list the beta for individual stocks and how they been calculated. For example the beta on Reuters.com is calculated on trailing 5-year prices, on a monthly basis, relative to the S&P 500.
Consider that BHP has beta = 1.17 and I can just hear a few posters toot tooting that AKK has less risk than BHP.
But then Yahoo has the beta for AKK has -1.88 which is a bit of a rarity as beta less than 0, indicates an inverse relation to the market - and most stocks move up over the long term. Might expect this from a gold stock possibly.
Like I said it is a very deep subject and beta is a very important variable that goes into CAPM for calculation of WACC which is essential to understand what a firm needs to earn on its projects to be making money and creating value.
Enough on beta ... I was just trying to make a point earlier
AKK Price at posting:
0.6¢ Sentiment: None Disclosure: Not Held
