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Beta
Term category: Stocks
In 10 words or less: A measure of a stock's volatility relative to the market as a whole.

Definition: The measure of a stock's volatility (systematic risk) relative to the market as a whole.

Advice: The beta of a stock is calculated by running a regression analysis.  The result is a beta coefficient.  If the beta coefficient is 1, the stock tends to be as volatile as the stock market.  A beta greater than 1 means the stock is more volatile, while a beta less than 1 means it's less volatile.

It's possible for stocks to have negative betas.  In this case, the stock tends to move in opposite directions than the market.  One example is Anheuser-Busch, which is though to benefit when the market is doing poorly because more people turn to drinking.

 

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