Is beta higher than 1 good or bad?

A beta greater than 1 indicates a stock's price swings more wildly (i.e., more volatile) than the overall market. A beta of less than 1 indicates that a stock's price is less volatile than the overall market. A beta of 1 indicates the stock moves identically to the overall market.

What happens if beta is greater than 1?

If beta is greater than one, the returns on the company stock are more volatile than the market return. A company stock with beta greater than one is called an aggressive stock. If beta is less than one, the returns on the company stock are less volatile than the market return.

Do you want a beta higher or lower than 1?

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.

Is beta less than 1 good?

A beta value that is less than 1.0 means that the security is theoretically less volatile than the market. Including this stock in a portfolio makes it less risky than the same portfolio without the stock. For example, utility stocks often have low betas because they tend to move more slowly than market averages.

Is a beta of 1.5 high?

A beta value of 1.5 indicates that the price of the stock is more volatile than the market. In fact, it is assumed to be 50% more volatile than the market. Tech stocks and small caps tend to have high betas.

The Finals Good and Bad - Beta Review

What does a beta of 2.0 mean?

Say a company has a beta of 2. This means it is two times as volatile as the overall market. We expect the market overall to go up by 10%. That means this stock could rise by 20%.

Is a beta of 1.2 risky?

Beta, which measures an asset's volatility and can be used to gauge risk, can be used in determining expected return. If a stock has a beta of 1.2, it might be considered 20 percent riskier than the benchmark and therefore should compensate investors with a higher expected return.

Is a beta above 1 risky?

High beta stocks, also known as volatile stocks, are those that have a beta of greater than 1, indicating that they are more volatile than the overall market. These stocks are considered to be riskier than the market average, but also have the potential for higher returns.

Is 2 a high beta?

A stock that is more volatile than the market over time has a beta greater than 1.0 and is a high-beta stock. High-beta stocks may be riskier, but provide the potential for higher returns. If a stock moves less than the overall market's volatility, that stock is a low-beta stock with a measurement of less than 1.0.

Is a beta of 2 bad?

A beta of two means the stock is twice as volatile as the overall market. A beta of 0.50 means the stock is half as volatile. If the S&P 500 index rises or falls 10%, you'd expect a stock with a beta of two to move 20%. A stock with a beta of 0.50 would typically move just 5% when the benchmark index moves 10%.

What does a stock beta of 1.5 mean?

Roughly speaking, a security with a beta of 1.5, will have move, on average, 1.5 times the market return. [More precisely, that stock's excess return (over and above a short-term money market rate) is expected to move 1.5 times the market excess return).]

What beta is considered high risk?

A beta above 1.0 means the stock will have greater volatility than the market, and a beta less than 1.0 indicates lower volatility. Volatility is usually an indicator of risk, and higher betas mean higher risk, while lower betas mean lower risk.

Does higher beta mean more risk?

By definition, the market as a whole has a beta of 1, and everything else is defined in relation to that: Stocks with a value greater than 1 are more volatile than the market, meaning they will generally go up more than the market goes up, and go down more than the market goes down.

What is considered a low beta stock?

A stock that has a market value above 1.0 is considered high-beta, whereas a stock with a market value lower than 1.0 is considered as low-beta. The beta, in any market across the world, is 1.0.

What does it mean if beta is too high?

What does it mean if your Beta-2 Microglobulin, Serum result is too high? Elevated concentration levels of beta-2 microglobulin is attributed to diseases with a high cell turnover. It is a powerful prognosis factor for multiple myeloma, a type of bone marrow cancer.

What does a beta of 1.6 mean?

Considering an example if a company has a beta of 1.6 it means that the returns of the company are 160% more volatile to the market.

What is the beta of Apple stock?

As of today (2023-03-24), Apple's Beta is 1.25.

Do high beta stocks outperform?

High-beta securities have more risk than the market and low-beta securities less. Thus, under CAPM high-beta stocks should have higher returns to compensate investors for their higher risk.

Is 1.3 beta high?

If a stock has a beta above 1, it's more volatile than the overall market. For example, if an asset has a beta of 1.3, it's theoretically 30% more volatile than the market. Stocks generally have a positive beta since they are correlated to the market.

Why invest in high beta stocks?

A beta of more than 1.0 means that the stock is more volatile than the overall market and a beta less than 1.0 indicates lower volatility than the benchmark index. Thus, stocks with higher betas tend to gain more in bull markets but also plummet harder in bear markets.

What does beta of 1.3 mean?

For example, if a stock's beta value is 1.3, it means, theoretically this stock is 30% more volatile than the market.

What does a 1.23 beta mean?

A Beta of 1.23 means that; a 1% move in the index will result in a 1.23% movement in the stock price. Beta is calculated not on the price or the index values but on the daily price returns versus the index returns.

What does a 2.5 beta mean?

A beta of greater than 1.0 indicates that the fund is more volatile than the market, and less than 1.0 is less volatile than the market. For example, if the market rises 1% and a fund has a beta greater than 2.5, the fund will rise, on average, 2.5%.

What does beta of 1.4 mean?

Beta Value Over One

This beta value shows security price volatility higher than market. So a beta value of 1.4 would indicate that the volatility of the stock is 40% higher than market. Adding this stock to your portfolio will cause risk to increase.