What does beta measure and how is it interpreted, Finance Basics

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The Beta of several industry sectors is shown below.

Industry                                                                                            Beta (β)

Banks                                                                                                   0.78      

Food and staples retailing                                                                       0.65

Materials                                                                                               1.11

Utilities                                                                                                 0.79

Food and Beverage and Tobacco production                                            0.57

Retailing (Discretionaries)                                                                     1.28

elecommunication Services                                                                   0.38

 Part A

What does Beta measure and how is it interpreted? In your answer you should refer to some of the industry measures above.

Part B

How does Beta differ from standard deviation? Explain why companies with a high standard eviation will not necessarily have a high beta.


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