What is Beta in the stock market | Types of Beta | Advantages, Disadvantages | Stock Beta Explained

From this video you will learn What is "Beta" in Stock market & how beta works, Types of Beta,
Advantages of Beta , Disadvantages of Beta, beta in stock market for beginners in english.

Beta:
Beta is a numeric value that measures the volatility of the stocks in relation to the changes in the overall stock market. In general and by definition of stock market, the markets such as S&P 500 index has a beta of 1.0 and the other individual stocks are ranked according to how much they deviate from the market.

How is the beta in the stock market determined?
The formula of beta is calculated as follows-
Beta = Co variance of a specific stock with a benchmark index in the share market of India/ The variance of the respective security over a stipulated period.
- If the beta is equal to 1, it means it is as volatile as the market
- If the beta is more than 1, it means that the stocks are more volatile than the market.
- If the beta is less than 1 but greater than 0, it means that the stocks are less volatile than the market.
- If the beta is equal to 0, it means that the stocks are uncorrelated to the market.

Types of beta of Indian stock:
1. Beta greater than 1
2. Beta less than 1
3. Beta = 1
4. Beta = 0
5. Beta less than 0

Advantages of using beta coefficient:
- One of the most popular advantage of beta is to estimate the cost of equity in valuation models. The CAPM (Capital Asset Pricing Model) estimates an assets Beta based on a single factor and that is the systematic risk of the market.
- Beta value of securities is one of the significant coefficients that investors analyse before investing.

Disadvantages of using beta coefficient:
- The biggest disadvantage of using beta is that it relies only on the past returns and does not take into account the new information that may impact returns in the future.
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Видео What is Beta in the stock market | Types of Beta | Advantages, Disadvantages | Stock Beta Explained канала SimplyInfo