BETA
This query is : Resolved
thanumalayan
(Querist)
12 October 2008
What is "beta" in CAPM of Financial Management? How shall we used in problems in exams? I want to know in detail? Pls.......
12 October 2008
BETA : RISK.
IT IS RISK FOR EXTRA RETURNS.
CAPM :l CAPITAL ASSET PRICING MODEL
IT IS RISK FOR EXTRA RETURNS.
CAPM :l CAPITAL ASSET PRICING MODEL
CA Nitin Wadhwani
(Expert)
12 October 2008
Beta is market sensitivity of the stock as compared to that sector or the entire market.
For Example, if the beta of a particular stock is 2, it implies that if the market moves up by 1%, that stock will move up 2% and vice-versa.
CAPM=Beta x Risk Adjusted Market Return.
Risk Adjusted Market Return = Market Return - Risk free return.
For Example, if the beta of a particular stock is 2, it implies that if the market moves up by 1%, that stock will move up 2% and vice-versa.
CAPM=Beta x Risk Adjusted Market Return.
Risk Adjusted Market Return = Market Return - Risk free return.
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