How Much Does This Stock Move With the Market?
Beta measures systematic risk โ how much a stock amplifies or dampens market moves. A beta of 1.5 means if the market falls 10%, this stock typically falls 15%.
FV, r, n) โ or type numbers directly: 10000 / (1 + 0.08)^1010000 / (1 + 0.08)^10If the market goes up 10% and your stock goes up 15%, your stock has a beta of 1.5. If it only goes up 7%, beta = 0.7. Beta measures how "jumpy" a stock is compared to the market โ the amplifier or dampener on market risk.
Beta = covariance(stock, market) / variance(market). Beta = 1 โ moves with the market. Beta > 1 โ amplifies market moves (tech, airlines). Beta < 1 โ dampens market moves (utilities, food). Beta < 0 โ moves opposite (rare โ gold sometimes).