What does 1.5 beta mean in stocks?

What does 1.5 beta mean in stocks?

Roughly speaking, a security with a beta of 1.5, will have move, on average, 1.5 times the market return. [More precisely, that stock’s excess return (over and above a short-term money market rate) is expected to move 1.5 times the market excess return).]

Is a beta greater than 1 GOOD?

A beta greater than 1 indicates that the security’s price tends to be more volatile than the market. A beta of less than 1 means it tends to be less volatile than the market. Many young technology companies that trade on the Nasdaq stocks have a beta greater than 1.

What does a 0.8 beta mean?

For example, a stock with a beta of 0.8 would be expected to return 80% as much as the overall market. A stock with a beta of 1.2 would move 20% more than the overall market. There is more than one way to calculate betas.

Is a low beta good or bad?

A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock’s beta is less than 1.0. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.

Is a beta of 1.5 high?

A high beta (greater than 1.0) indicates moderate or high price volatility. A beta of 1.5 forecasts a 1.5% change in the return on an asset for every 1% change in the return on the market.

Is a low stock beta good?

The lower the Beta value, the less volatility the stock or portfolio should exhibit against the benchmark. This is beneficial for investors for obvious reasons, particularly those that are close to or already in retirement, as drawdowns should be relatively limited against the benchmark.

Is a 0.2 beta good?

Frequently researchers will select a sample size and decision rule to insure that beta is 0.20 or less (or equivalently power is 0.80 or more). Some researchers prefer to insure that the beta level is 0.10 or less.

What is considered a high beta?

What are high-beta stocks? A high-beta stock, quite simply, is a stock that has been much more volatile than the index it’s being measured against. A stock with a beta above 2 — meaning that the stock will typically move twice as much as the market does — is generally considered a high-beta stock.

What is considered a high-beta?

How do you read a stock beta?

Key Takeaways

  1. Beta is a concept that measures the expected move in a stock relative to movements in the overall market.
  2. A beta greater than 1.0 suggests that the stock is more volatile than the broader market, and a beta less than 1.0 indicates a stock with lower volatility.