Investing 101: Risk Terminology

Home
>
Investing
>
Investing 101: Risk Terminology - BETA

Investing 101: Risk Terminology - BETA

About thirty years ago, statisticians armed with all of their statistical theories began to confront the financial markets. A handful of useful tools emerged that the average investor should be familiar with when they look to purchase stocks.

One secret that people "in the know" use is "BETA". "Beta" is a number which reflects how volatile a stock has been relative to the market. This number is also quoted on most quotation services so it is easy to get to, but I have often found that it is never defined. A BETA of 1.00 means that on average, a stock has traditionally matched the markets swings both on the upside and on the downside. A BETA greater than 1.00 reflects above average market volatility, and a BETA of less than 1.00 indicates below average market volatility. When a BETA is less than zero it indicates that the stock moves contrary to the general market, going down in bull markets and rising in bear markets.. It used to be the case that Gold mining stocks would have negative betas. Internet stocks for example have very high betas.

Many of the analysts that cross your TV screen and make recommendations use BETA as their primary screening device in searching for suitable investments. So the next time your broker calls with an investment recommendation, ask him what the BETA is and then relish the silence on the other end of the phone. Then send him a copy of this article!

Dowjonesfully,
-Harald Anderson
http://www.eOptionsTrader.com

Harald Anderson is the founder and Chief Analyst of eOptionsTrader.com a leading online resource of Options Trading Information. He writes regularly for financial publications on Risk Management and Trading Strategies. His goal in life is to become the kind of person that his dog already thinks he is. http://www.eOptionsTrader.com.

In The News:

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://seekingalpha.com/article/107411-shorts-puts-cash-and-funds-investing-in-bear-marketcid=1273620188ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNF_qVhqo8bFAE7tNpBDyd0vtNwH4wShorts, Puts, Cash and Funds: bInvesting/b in Bear Market/abrfont size=-1font color=#6f6f6fSeeking Alpha,nbsp;NYnbsp;-/font nobr2 hours ago/nobr/fontbrfont size=-1A few months ago, shortly after I shorted a high stock price real estate binvestment/b trust, the position went against me by 13 points. b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://seattletimes.nwsource.com/html/businesstechnology/2008425805_motley23.htmlcid=0ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNGAqJ7ZAsxsJQKdwroK6I_vCrrTGgThe Motley Fool, useful tips on binvesting/b/abrfont size=-1font color=#6f6f6fSeattle Times,nbsp;United Statesnbsp;-/font nobr9 hours ago/nobr/fontbrfont size=-1How to calculate the annual on multiple stock purchases; is binvesting/b in solar a bright idea? Q: If I#39;ve made multiple purchases of a stock over time, b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://gawker.com/5096595/investing-wisely-office%2Bstyle%3Fskyline%3Dtrue%26s%3Dxcid=1273330908ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNF8EScBFdLv6_6gNKeepHuJ54z6uQbInvesting/b Wisely, Office-Style/abrfont size=-1font color=#6f6f6fGawker,nbsp;NYnbsp;-/font nobr22 hours ago/nobr/fontbrfont size=-1Did he make the right call in binvesting/b in the Scranton real estate market, and what did he probably pay to make his parents#39; former residence stay in the b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.pressandguide.com/stories/112308/loc_20081123009.shtmlcid=1273157022ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNHIzoFdfM1WSdwqcQNH3lN3rKUWbADis-binvesting/b in education and our future/abrfont size=-1font color=#6f6f6fDearborn Press and Guide,nbsp;MInbsp;-/font nobrNov 22, 2008/nobr/fontbrfont size=-1We are watching the meltdown of our state, nation#39;s and the world#39;s economy, along with the implosion of the housing and domestic car industry. b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.bloggingstocks.com/2008/11/22/comfort-zone-investing-getting-beyond-today/print/cid=1273213335ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNGy2qaCOtr5qyYHB4rtCF9WlV71SAComfort Zone bInvesting/b: Getting beyond today/abrfont size=-1font color=#6f6f6fBloggingStocksnbsp;-/font nobrNov 22, 2008/nobr/fontbrfont size=-1Looking back is an easy way to invest. It seems absolutely obvious that all of us should have sold stocks in October of last year, when the Dow Jones b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.currentworldnews.net/2008/11/20/china-increasing-computer-espionage-on-us/cid=1272456186ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNHCTfIiD9LLMOHnBe_xt32SoQM3OAimg src=http://news.google.com/news?imgefp=i4tz8F0VEpsJimgurl=www.currentworldnews.net/images/china_spy_attacks_internet.jpg width=80 height=60 alt= border=1brfont size=-2Current World News/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.forbes.com/reuters/feeds/reuters/2008/11/20/2008-11-20T235015Z_01_N20439587_RTRIDST_0_USA-CHINA-UPDATE-1.htmlcid=1272456186ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNH2Sie80azznplDKyacXXqGxlSGqgUS panel urges action on China currency, binvesting/b/abrfont size=-1font color=#6f6f6fForbes,nbsp;NYnbsp;-/font nobrNov 20, 2008/nobr/fontbrfont size=-1By Doug Palmer WASHINGTON (Reuters) - Congress should pass legislation next year to pressure China to raise the value of its currency and require Beijing#39;s b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.rightsidenews.com/200811222724/global-terrorism/playing-china-rules-and-the-illusions-of-free-trade.htmlcid=1272456186ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNFAWxignyitRUZQSGOyuN-EX3KmSgPlaying China Rules and The Illusions Of quot;Free Tradequot;/a font size=-1 color=#6f6f6fnobrRight Side News/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.google.com/hostednews/afp/article/ALeqM5hAiZBxD0PKRT8u4F6gKOOP8I4n2gcid=1272456186ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNGNTIuVlvuG304vwUUBjMyU5fTsRQUS Congress warned of Chinese cyber, space threats/a font size=-1 color=#6f6f6fnobrAFP/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.guardian.co.uk/technology/2008/nov/20/china-us-military-hackingcid=1272456186ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNFzx2EJvs8FNrMmCYzuLwBeL1u0jwChina winning cyber war, Congress warned/a font size=-1 color=#6f6f6fnobrguardian.co.uk/nobr/font/fontbrfont class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1272456186hl=ennobrall 462 news articles/nobr/a/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://daily-journal.com/archives/dj/display.php%3Fid%3D431508cid=1273480917ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNHbLx0-Jcxjx27aPY4rqZduHY-JjgThe Motley Fool for Sunday, Nov. 23/abrfont size=-1font color=#6f6f6fKankakee Daily Journal,nbsp;ILnbsp;-/font nobr12 hours ago/nobr/fontbrfont size=-1Not binvesting/b soon enough. You#39;re rarely too young (or too old) to invest. Kids have the most to gain from many decades of stock appreciation. b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www2.hickoryrecord.com/content/2008/nov/22/experts-do-your-homework-investing/cid=0ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNE0cR5ShHSeZNi97iF6k9M0L2_bmwExperts: Do your homework before binvesting/b/abrfont size=-1font color=#6f6f6fHickory Daily Record,nbsp;NCnbsp;-/font nobr14 hours ago/nobr/fontbrfont size=-1quot;If something seems too good to be true, it#39;s usually best to run, not walk, away from it,quot; said Thomas F. Bare II, a registered binvestment/b adviser and b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.baltimoreexaminer.com/business/112308top10.htmlcid=0ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNHROMlKOx1sGWAyNoQ56go3f1qAeQbInvesting/b: T. Rowe launches two new global mutual funds/abrfont size=-1font color=#6f6f6fBaltimore Examiner,nbsp;MDnbsp;-/font nobr12 hours ago/nobr/fontbrfont size=-1By Andrew Cannarsa Baltimore-based binvestment/b management firm T. Rowe Price last week introduced two new mutual funds — Global Large-Cap and Global Real b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.chron.com/disp/story.mpl/editorial/outlook/6126840.htmlcid=1273572796ei=uJ4pSby3GKbU6gPI0IDvCgusg=AFQjCNGPHwvHrRoP_6Oz8T70l4XyZxX1oAWhy I give thanks to big government/abrfont size=-1font color=#6f6f6fHouston Chronicle,nbsp;United Statesnbsp;-/font nobr11 hours ago/nobr/fontbrfont size=-1Stepping up in an emergency, one which market forces could not quickly correct, and binvesting/b an ungodly sum to keep the financial market running (or at b.../b/font/div/font/td/tr/table

investing - Google News