A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock’s beta is less than 1.0. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.

Why are there different betas for the same stock?

Expert Answers A stock with a beta greater than one is more volatile than the market in which it is listed. If its beta is less than one, then it is less volatile than the market in which it is listed. There are reasons why different firms in the same industry may have different betas.

What is the beta value of a stock?

The stock beta definition is the covariance of the stock’s price and a broad market index’s price divided by the variance of the index price. A stock more volatile than the market has a beta value greater than 1, and one that’s less volatile than the market has a beta value less than 1. Understanding Beta Values of Stocks

What’s the difference between low beta and high beta?

If a stock moves less than the market, the stock’s beta is less than 1.0. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.

How is the beta coefficient related to the market?

The beta coefficient can be interpreted as follows: 1 β =1 exactly as volatile as the market 2 β >1 more volatile than the market 3 β <1>0 less volatile than the market 4 β =0 uncorrelated to the market 5 β <0 negatively correlated to the market

What’s the difference between equity beta and levered beta?

, on the other hand, only shows the risk of an unlevered company relative to the market. It includes business risk but does not include leverage risk. Levered beta (equity beta) is a measurement that compares the volatility of returns of a company’s stock against those of the broader market.