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Beta Coefficient

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Beta Coefficient

Portfolio beta averages of more than one are more sensitive to price movements than the overall market.

Definition:

Beta coefficient, of an individual security or portfolio, helps to volatility relative to the market. The market's beta is always one, regardless of market conditions. A beta of more than one means the portfolio is more sensitive to price movements than the market. A beta of less than one means the portfolio is less sensitive to price movements than the overall market. In rising market conditions, a higher beta may mean more potential price appreciation. However, a higher beta also means more potential portfolio risk.

Also Known As: volatility
Common Misspellings: bata, betta
Examples:

A client's securities portfolio has an average beta of 1.8. The client's holdings will rise or fall faster than the overall market.

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