What is Beta?

Volatility of a particular stock is measured by what is commonly called beta. Since stocks are characterized by their dynamic nature in terms of rising and falling prices, knowing how volatile a stock is will be extremely valuable. Such knowledge will facilitate your decision making in terms of knowing when to sell and buy a stock.

The higher the value of the beta, the higher the volatility of the stock is. If the value of beta is of a low amount than the corresponding increases and decreases in the price of the stock are also of a low value. However, if the economic conditions are unfavorable, then it will be good for the beta to be of a lower amount. On the other hand, if the market is experiencing an upward movement, then a high beta will be beneficial for the investor.

Beta changes are triggered by changes in the future prospects of the company. Therefore, beta figures can be used to judge the future trends in the price of the stock.

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