BETA – ß

BETA – ß

This is a measure to calculate the degree of financial risk. It refers to volatility or variation in return on security x in response to va... 11:28 PM

This is a measure to calculate the degree of financial risk. It refers to volatility or variation in return on security x in response to variation in the market returns. It is a most widely used measure.

ßj = covariance jm/ SD m

So, j refers to ß of individual security, covariance jm means covariance between returns on security j and market returns.

There are three types’ securities in the market according to ß point of view.

• 1) Defensive securities – if ß value is less than 1
• 2) Neutral securities – if ß value is equal to 1
• 3) Aggressive securities – if ß value is more than 1