Talk:Beta (finance)

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Contents 1 gold stocks negative beta? 2 calculation question 3 financial beta and returns 4 new sections necessary? 5 Beta is not volatility!

[edit] gold stocks negative beta?

The idea that "people get out of the market and go into gold" is a cute hypothesis, but I think that it is not in fact true. The statement in the article that gold related stocks have negative beta needs a citation or it should be removed. A more interesting fact is that gold-mining stocks have high risk but very low beta. This illustrate the important difference between beta and risk.

[edit] calculation question

In calculation of Beta, what kind of return data do we use, daily, montly, or other? Do we use return data that is greater than 1, i.e, if the interest rate is 5%, we use return as 1.05 or 0.05 ? This data specification

Thanks, Hua

depends on the purpose - all time frames are used. the returns are generally of the form .034. Its actually my understanding (not reflected in this article) that the technically correct returns to use are the market returns less the risk free rate. Is this usually ignored in practice, but I think the academic specifications call for it. 24.153.227.130 17:14, 21 February 2007 (UTC)

if i have the intercept, the standard deviation and the correlated, how can i calculate the beta??

[edit] financial beta and returns

I fail to see something in the article. I quote:

If the market with a beta of 1 is expected to return 8%, a stock with a beta of 1.5 should return 12%.

That seems ok if the α_a coefficient in the regression is null, but not otherwise. For example, it is clear that if all the returns of $a$ are incremented by the same amount, its beta does not change at all. I wait for comments before modifying the article. --zeycus 8:04, 29 August 2007 (UTC)

I wrote the Investing section for this article. I see your point, and as zeycus pointed out the statement is not always true...I probably should have stated it differently. I have made the necessary change. --JohnDoe0007 09:32, 29 October 2007 (UTC)

[edit] new sections necessary?

The sections "Estimation of Beta" and "Extreme and interesting cases" seem to be almost useless at this point. I see the attraction to adding them to highlight certain factoids, but at no time did they ever really contain sufficient information that would warrant new sections. They essentially restate things that have already been fleshed out, better and with more detail, in more appropriate sections of the article.

I suggest these sections be taken out of the article entirely, as they really add no value to the article, and in my opinion, actually detract from its encyclopedic integrity.

I ask for feedback on these thoughts, and if no one disagrees or if enough agree, I will remove the sections after some time. --JohnDoe0007 09:44, 29 October 2007 (UTC)

[edit] Beta is not volatility!

I fixed the first sentence which defined beta as a "measure of volatility". This is very misleading. Every stock has a specific risk that is uncorrelated with the market. It is possible for a low beta stock to have a high volatility. When it comes to portfolios, "beta=volatility" is closer to the truth, but then only if the portfolio is highly diversified. A quant (talk) 02:49, 24 May 2008 (UTC)