Beta value, Financial Management

Beta Value

Risk is an important consideration while investing in any security. It is the possibility that realised returns will be less than the returns expected. The degree, to which different portfolios are affected by 'risk' as compared to the effect on the market as a whole, varies and is measured and calculated by 'Beta'. The Beta factor explains the movement in a stock's or a portfolio's returns in relation to that of the market returns.


Beta is given by:   


Beta        =      {Covariance (X, Y) / Variance (X)}



'Y' is the returns on the security,

'X' is the market returns or index,

'Covariance' is a measure of how the two variables 'co-vary', and

'Variance' is the square of standard deviation.

Posted Date: 7/25/2012 8:56:01 AM | Location : United States

Related Discussions:- Beta value, Assignment Help, Ask Question on Beta value, Get Answer, Expert's Help, Beta value Discussions

Write discussion on Beta value
Your posts are moderated
Related Questions
Question 1: Analyze the practice of democracy as advocated by the early Greek political thinkers. Question 2: To what extent can Man live peacefully with each other wi

The potato chip industry in the Northwest in 2007 was competitively structured and in long-run competitive equilibrium; firms were earning a normal rate of return and were competin

Assume Intel''s stock has an expected return of 26% and a volatility of 50%, while Coca-Cola''s has an expected return of 6% and volatility of 25%. If these two stocks were perfect

Liabilities The company must take into account the nature of its liabilities as well as its solvency position. Cash Flows: Besides the investment yields, money flows as paid

Describe the difference between a parallel loan and a back-to-back loan. Answer:  A parallel loan contains four parties.  One MNC (multinational company) borrows and re-lends to

Techiniques of capm Effects of capm

Current Yield Current yield is defined as the annual coupon interest received on the market price.          Current Yield =

A mortgage may be defined as a pledge of property to secure payment of a debt. Depending upon the terms of mortgage agreed upon between the lender and the borrower, mor

1. If Robinson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain. 2. Construct Robinson’s market va

Define the concept of a real option. Discuss some real options a firm can be confronted with when investing in real projects. A positive APV project is accepted under the supposi