BETA co-efficient
This query is : Resolved
28 April 2011
1.I am wondering what do u exactly mean when the beta of a company is 1 ??
2.Can the beta of a security be 0??how does that happen?
3.what is the beta for risk free security??
Please explain in detail coz i wanna get the concept....Thanx in advance..
2.Can the beta of a security be 0??how does that happen?
3.what is the beta for risk free security??
Please explain in detail coz i wanna get the concept....Thanx in advance..
28 April 2011
If beta is one : It means the stock prices of a particular Company's shares moves in the same direction where the stock market goes.
.
Suppose today index is up by 2% then the share prices of the company would also go up by 2%.
.
If the beta is .7 then it means the prices of the shares will move up (on either side) 70% of the relative market movement.
It means if the market moves to 2% upside; then the prices will move up by 1.4% of the shares of the said company (the beta being .7).
.
Hence less the beta; the market price of a company's share is not volatile to the market movement.
It means the market movement is not so affecting the prices of the share of the company.
.
The beta of a security may be O when there is no change in the share prices of a particular company - whether the market goes up or goes down.
.
This may happen when very few trading is there in the stock market of that particular shares.
.
Your Home Work :
Now answer the point no. 3 at your own.
.
Suppose today index is up by 2% then the share prices of the company would also go up by 2%.
.
If the beta is .7 then it means the prices of the shares will move up (on either side) 70% of the relative market movement.
It means if the market moves to 2% upside; then the prices will move up by 1.4% of the shares of the said company (the beta being .7).
.
Hence less the beta; the market price of a company's share is not volatile to the market movement.
It means the market movement is not so affecting the prices of the share of the company.
.
The beta of a security may be O when there is no change in the share prices of a particular company - whether the market goes up or goes down.
.
This may happen when very few trading is there in the stock market of that particular shares.
.
Your Home Work :
Now answer the point no. 3 at your own.
Message likes :
1 times
28 April 2011
sir please explain what would be the effect on return from the securities and the related risk if the beta is 0,1 and above 1..
28 April 2011
Firstly, analyze my answer regarding first two points.
.
Then you will find the answer yourself.
.
Still if you don't find the answer; I will reply after one day.
.
If you find the answer; then write about it.
.
Then you will find the answer yourself.
.
Still if you don't find the answer; I will reply after one day.
.
If you find the answer; then write about it.
Message likes :
1 times
28 April 2011
yes sir i think i got it..i will write tomorrow..u please check and temme whether or not i am correct..
Thank u so much..tame shu saras shikshak cho..!!
Thank u so much..tame shu saras shikshak cho..!!
29 April 2011
so we can say,
if the beta is 1..means the security of the company bears the same risk as the market does coz its share prices move as per the market index...
If the beta is 0, the market movements have nothing to do with the company's securities' prices...so there is no risk involved...
This is the case with goverment securities which we assume to be risk free(i assume no adversities in the givernment as in case of Libya at the moment..)..So, Government securites have the beta 0..Whatever be the situation of the market, return is guaranteed...
if the beta is 1..means the security of the company bears the same risk as the market does coz its share prices move as per the market index...
If the beta is 0, the market movements have nothing to do with the company's securities' prices...so there is no risk involved...
This is the case with goverment securities which we assume to be risk free(i assume no adversities in the givernment as in case of Libya at the moment..)..So, Government securites have the beta 0..Whatever be the situation of the market, return is guaranteed...
29 April 2011
Yes.
.
If you learn in this way; your BETA of going answer WRONG is 0 whoever is the examiner.
.
If you learn in this way; your BETA of going answer WRONG is 0 whoever is the examiner.
Message likes :
1 times
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- ITR 2 Short Term gain & Long term gain
- Itr 1 processing
- Reporting Income under Section 44ADA
- Off Market debit and credit transaction
- Showing Gift from relative in ITR for this year
- ITR validation error - Balance sheet is not filled
- ITR 1: Details for showing Exempt Income
- ITR returnFY25-26
- Share accounting-->fifo - capital gain - period as per fifo?
- Short Term Capital gain on shares bought and sold after 2018 onwards
- Opting out" of regime provided under subsection (1A) of Section 115BAC but Form 10IEA is not filed.
- Gst invoice numbering and delivery challan numbering
- Sales amount in Gstr1
- E Commerce GSTR1 & 3B how to file
- GST Cancellation without jurisdiction
- Legal Opinion on Registrar's Refusal to Investigate a Society for Non-Renewal and Non-Compliance
- GST Refund_RFD-01
- Form10BD was uploaded successfully without any Error but after 24 hours, Form10BE are not available
- Annexure B utility for GST Refund
- Tax amount diff in Gstr1 and 3B in tax compare reports
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
