How to calculate the beta value?
Beta calculation: beta coefficient = correlation coefficient between returns and market portfolio returns × (standard deviation of stock returns/standard deviation of market portfolio returns).
Calculated by regression method, the risk brought by the fluctuation of the whole market is determined as 1. When the price fluctuation of an asset is consistent with the fluctuation of the whole market, its beta value is also equal to1; If the price fluctuation is greater than the whole market, its beta value is greater than1; If the price fluctuation is less than the market fluctuation, its beta value is less than 1.
What is the concept of high beta?
High beta means that the volatility of individual stocks is higher than that of the whole stock market. The so-called beta value is an index to measure the level of stock volatility and market volatility. The higher the beta value of securities, the greater the potential risk and the higher the investment income; On the contrary, the lower the beta value of securities, the smaller the degree of risk and the lower the return on investment.
If β is 1, it means that the market is up 10% and the stock is up10%; The market fell 10%, and the stock fell accordingly 10%. If β is 1. 1 and the market rises 10%, then the stock rises 1 1%, that is, the percentage of the market rise is multiplied by the β coefficient.
For example, the Shanghai Composite Index represents the whole market, and the beta value is determined as 1. When the Shanghai Composite Index rises by 10%, the price of a stock also rises by 10%. The increase between the two is consistent with the risk, and the beta value of quantifying the individual risk of stocks is also 1. If the beta value of the stock is 0.5, its fluctuation range is only 1/2 of the Shanghai Composite Index. When the Shanghai Composite Index rose by 10%, the stock only rose by 5%.