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Beta and Risk in Troubled Markets, Part 2

Friday, January 16, 2009

In this mini-series, we’re examining the value of beta as a measurement of risk. In this post, we want to examine how the betas of some popular stocks, indexes, and ETFs changed during 2008 and especially during the fall crash. First, we should clarify exactly what we’re measuring. What is beta? Beta is metric that describes the systemic risk of an asset or portfolio. Because it is not possible to alleviate all risk by simple diversification, investors and traders use beta to…

Beta and Risk in Troubled Markets, Part 1

Thursday, January 15, 2009

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The old maxim is that when major market movements occur, all betas go to one. We decided to look at the beta for a few stocks during 2008 to determine whether and to what extent that maxim held true. The reason we wanted to investigate the beta exhibited during 2008 – and especially during the fall crash – is that investors and traders use beta as a measurement of how risky an asset is relative to the market, with the goal…

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Beta and Risk in Troubled Markets, Part 2

Beta and Risk in Troubled Markets, Part 1

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