133 2 267 4 beta 369 064 164 179

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Unformatted text preview: arket risk, and shows a stock’s volatility relative to the market. Indicates how risky a stock is if the stock is held in a well­diversified portfolio. What does beta tell us? What does beta tell us? A beta of 1 implies the asset has the same systematic risk as the overall market A beta < 1 implies the asset has less systematic risk than the overall market A beta > 1 implies the asset has more systematic risk than the overall market Understanding Beta Understanding Beta Source: http://www.investopedia.com/video/ Table 13.8 Table 13.8 Total versus Systematic Risk Total versus Systematic Risk Consider the following information: Standard Deviation Security C 20% Security K 30% Beta 1.25 0.95 Which security has more total risk? > K Which security has more systematic risk? > C Which security should have the higher expected return? > C (why?) Work the Web Example Work the Web Example Many sites provide betas for companies Yahoo Finance provides beta, plus a lot of other information under its key statistics link Click on the web surfer to go to Yahoo Finance Enter a ticker symbol and g...
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This document was uploaded on 01/14/2014.

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