Friday, December 12, 2008


Came across an interesting article on the Business Week website.  It provides a simple and clear explanation of stock beta numbers. This is college Finance 101. 

Key Point: The sooner you learn and understand this and other finance and economics related topics, the better off you will be.

Stock Screen: Low-Beta Beauties
S&P's latest list finds top-ranked stocks that tend to be less volatile than the broader market. Among them: Genentech, PepsiCo, and Wal-Mart

By Beth Piskora

The risk metric known as beta can be a useful investment criterion during these times of market volatility.

An issue with a beta of 1.5, for example, tends to move 50% more than the total market in the same direction. An issue with a beta of 0.5 tends to move 50% less. If a stock or stock fund moved exactly as the market moved, it would have a beta of 1.0. Thus, high beta is typical of a volatile stock, while a low beta is typical of a stock that moves less than the market as a whole. A stock with a negative beta moves in the direction opposite to that of the market. With a beta of -1.0, a stock has the same volatility as the market, but tends to rise when the market falls, and vice versa.

What are your thoughts?

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