Market Risk = Beta

• is a relative measure of volatility.
• It measures the movement of a security's price with respect to an underlying index.
• It is derived by the use of linear regression and
• it is the slope of the regression line.
• A large-cap stock with a beta of 1.20 would be expected to be 1.20 times as volatile as the S&P500 index. If the S&P 500 increased by 5%, the value of the stock would be expected increase by 6%. If the S&P 500 declined 5%, the stock would be expected to decline in value by 6%.
• A portfolio's beta is the weighted average of the betas of all the securities in the portfolio. (Mutual funds are portfolios.)
• Beta is a measure of the systematic risk of a portfolio, i.e., that portion of risk that cannot be diversified away.
• Beta is a relative measure of the total risk of individual assets and portfolios of assets.

• Market Risk (Beta)
• Linear Regression
• Risk & Return