Overview
Beta measures how sensitive a stock’s returns are to movements in a reference market index. It captures systematic market risk, not absolute volatility.
Formula
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How to Interpret
High Value
A beta above one means the stock tends to amplify market movements.
Low Value
A beta below one means the stock tends to respond less strongly to market movements.
Where It Is Used
Used to adjust portfolio market exposure, estimate cost of equity, and monitor systematic risk.