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Beta coefficient (β) is a measure used by financial analysts and investors to calculate the risks involved in a particular stock or portfolio in relation to the overall market risk.
When calculating β of a stock or portfolio, it is contrasted to the market β value of 1.0. The beta value of individual stocks or portfolios are thus expressed with their deviation from the value of 1.0. Regression analyses are used to measure these deviations.
Beta coefficient (β) is also a key parameter in risk-based asset pricing.
Also see: capital asset pricing model (capm)
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