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What are some reasons for changes in beta and should one should be more concerned with a...

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Finance

What aresome reasons for changes in beta and should one should be moreconcerned with a negative versus positive factor.

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4.3 Ratings (542 Votes)
Beta is a measure of a stocks systematic or market risk and offers investors a good indication of an issues volatility relative to the overall stock market The market beta is set at 100 and a stocks beta is calculated by Value Line based on past stockprice volatility If an equity has a beta of 100 it will probably move in lock step with the broader market For example if the market rises falls by 10 an issue with a beta of 100 will probably increase decrease by about the same amount A beta above 100 indicates that a stocks volatility is greater than the market For instance an issue with a beta of 130 has a level of volatility 30 greater than the market average Hence given a 10 increase decrease in the stock market our hypothetical issue will probably climb fall about 13 The reverse is also true A stock with a beta of 70 has lower volatility than the overall market and a broad increase decrease of 10 would likely result in a 7 gain loss for our lowbeta issue Betas tend to vary across companies and industries Stocks of large companies with numerous operating segments such as HewlettPackard HPQ tend to have betas close to 100 as demand for their products tends to increase or decrease in line with aggregate economic expansion or contraction Defensive stocks that    See Answer
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What aresome reasons for changes in beta and should one should be moreconcerned with a negative versus positive factor.

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