What does a beta less than 1 mean?

A beta of less than 1 indicates that a stock's price is less volatile than the overall market. A beta of 1 indicates the stock moves identically to the overall market.

What does a low beta indicate?

A beta value that is less than 1.0 means that the security is theoretically less volatile than the market. Including this stock in a portfolio makes it less risky than the same portfolio without the stock. For example, utility stocks often have low betas because they tend to move more slowly than market averages.

What does a beta of 0.7 mean?

A fund with a beta of 0.7 has experienced gains and losses that are 70% of the benchmark's changes. A beta of 1.3 means the total return is likely to move up or down 30% more than the index. A fund with a 1.0 beta is expected to move in sync with the index."

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.

What does a beta of 0.8 mean?

If the stock is more volatile than the market, its beta will be more than 1, and if it is less volatile than the market, its beta will be less than 1. For example, a stock with a beta of 0.8 would be expected to return 80% as much as the overall market.

What is Beta? - MoneyWeek Investment Tutorials

How do you interpret beta?

Interpreting Beta

A β of 1 indicates that the price of a security moves with the market. A β of less than 1 indicates that the security is less volatile than the market as a whole. Similarly, a β of more than 1 indicates that the security is more volatile than the market as a whole.

What does a beta of 0.3 mean?

The beta for a stock describes how much the stock's price moves compared to the market. If a stock has a beta above 1, it's more volatile than the overall market. For example, if an asset has a beta of 1.3, it's theoretically 30% more volatile than the market.

What is a good beta value in statistics?

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 β in regression?

In statistics, standardized (regression) coefficients, also called beta coefficients or beta weights, are the estimates resulting from a regression analysis where the underlying data have been standardized so that the variances of dependent and independent variables are equal to 1.

What does the beta value mean in regression?

The beta values in regression are the estimated coeficients of the explanatory variables indicating a change on response variable caused by a unit change of respective explanatory variable keeping all the other explanatory variables constant/unchanged.

What does a beta of 0.2 mean?

If your industry has a beta of 0.2, it is only 20% as risky as the index. That means if the S&P 500 loses 10%, your industry only loses about 2%.

What does negative beta mean stocks?

A negative beta correlation means an investment moves in the opposite direction from the stock market. When the market rises, a negative-beta investment generally falls. When the market falls, the negative-beta investment will tend to rise. This is generally true of gold stocks and gold bullion.

What does a beta of 0.9 mean?

A beta that is greater than 1.0 means that the fund is more volatile than the benchmark index. A beta of less than 1.0 means that the fund is less volatile than the index. In theory, if the market goes up 10%, a fund with a beta of 1.0 should go up 10%; if the market drops 10%, the fund should drop by an equal amount.

What does a negative beta value mean in regression?

In regression analysis, the beta coefficient represents the change in the outcome variable for a unit change in the independent or predictor variable. A negative beta coefficient indicates the decrease in the dependent variable for a unit change in the independent variable.

How do you know if a regression coefficient is significant?

Coefficients having p-values less than alpha are statistically significant. For example, if you chose alpha to be 0.05, coefficients having a p-value of 0.05 or less would be statistically significant (i.e., you can reject the null hypothesis and say that the coefficient is significantly different from 0).

What is beta risk?

Beta risk is the probability that a false null hypothesis will be accepted by a statistical test. This is also known as a Type II error or consumer risk. In this context, the term "risk" refers to the chance or likelihood of making an incorrect decision.

Do low beta stocks outperform?

Research has shown that low-risk or low beta (volatility) stocks outperform high-risk stocks. According to the efficient markets hypothesis, the stock market is thought to be highly efficient.

Can a stock have a zero beta?

A zero-beta portfolio is constructed to have zero systematic risk—a beta of zero. Beta measures an investment's sensitivity to a price movement of a specifically referenced market index.

What are high beta stocks?

High beta stocks are those that are positively correlated with returns of the S&P 500, but at an amplified magnitude. Because of this amplification, these stocks tend to outperform in bull markets, but can greatly underperform in bear markets.

What is a good PE ratio for stocks?

There's no specific number that indicates expensiveness, but, typically, stocks with P/E ratios of below 15 are considered cheap, while stocks above about 18 are thought of as expensive.

What does a debt beta of 0 mean?

The beta of debt β_D equals zero. This is the case if debt capital has negligible risk that interest and principal payments will not be made when owed. The timely interest payments imply that tax deductions on the interest expense will also be realized—in the period in which the interest is paid.

Is .001 statistically significant?

If the p-value is under . 01, results are considered statistically significant and if it's below . 005 they are considered highly statistically significant.

Is p-value 0.1 Significant?

Significance Levels. The significance level for a given hypothesis test is a value for which a P-value less than or equal to is considered statistically significant. Typical values for are 0.1, 0.05, and 0.01. These values correspond to the probability of observing such an extreme value by chance.