Definition of beta

A measure of a stock's risk of volatility compared to the overall market. The market's beta coefficient is 1.00. Any stock with a beta higher than 1.00 is considered more volatile than the market, and therefore riskier to hold, whereas a stock with a beta lower than 1.00 is expected to rise or fall more slowly than the market.

In strict percentage terms, a stock with a beta of 0.75 is likely to rise or fall 0.75 per cent if the market rises or falls 1.00 per cent. Low-beta stocks are also called defensive stocks because investors like to hold them when the market is on a downtrend or is particularly volatile. High-beta stocks tend to be favoured when the market is rising steadily and investors are happy to take greater risks in order to maximise returns.

 

 

Usage on the FT

 

The beta data point appears on all of our equity tearsheets pages.

Beta

We use Beta 5Y from the Multex Ratios and Statistics table, which is provided to us by Reuters. The Market Guide Beta is the slope of the 60 month regression line of the percentage price change of the stock relative to the percentage price change of the S&P 500. Beta values are not calculated if less than 24 months of pricing is available.


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