Difference between revisions of "Calculate Beta"
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Beta is the volatility or risk of a particular stock relative to the volatility of the entire stock market. <ref>http://www.money-zine.com/Investing/Stocks/Stock-Beta-and-Volatility/ </ref> Beta is an indicator of how risky a particular stock is, and it is used to evaluate its expected rate of return. Beta is one of the fundamentals that stock analysts consider when choosing stocks for their portfolios, along with price-to-earnings ratio, shareholder's equity, debt-to-equity ratio, and several other factors. | Beta is the volatility or risk of a particular stock relative to the volatility of the entire stock market. <ref>http://www.money-zine.com/Investing/Stocks/Stock-Beta-and-Volatility/ </ref> Beta is an indicator of how risky a particular stock is, and it is used to evaluate its expected rate of return. Beta is one of the fundamentals that stock analysts consider when choosing stocks for their portfolios, along with price-to-earnings ratio, shareholder's equity, debt-to-equity ratio, and several other factors. | ||
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== Steps == | == Steps == | ||
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# Understand that, like most financial prediction tools, beta cannot reliably predict the future. Beta merely measures the past volatility of a stock. We may want to project that volatility into the future, but that won't always work. A stock's beta can change drastically from one year to the next. That's why it's not a terribly reliable predictive tool. | # Understand that, like most financial prediction tools, beta cannot reliably predict the future. Beta merely measures the past volatility of a stock. We may want to project that volatility into the future, but that won't always work. A stock's beta can change drastically from one year to the next. That's why it's not a terribly reliable predictive tool. | ||
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== Tips == | == Tips == | ||
