Beta equation
The beta of a security is determined as follows: |
Similar financial terms
BetaThe beta (β) is a statistical measure of market risk on a portfolio. The beta has traditionally been used to estimate the elasticity of a stock portfolio's return relative to the market index. A beta of 0.7 means the total return of the security is likely to move up or down 70% of the market change; 1.3 means total return is likely to move up or down 30% more than the market. Beta is referred to as an index of the systematic risk due to general market conditions that cannot be diversified ...
Zero-beta portfolio
A zero-beta portfolio is constructed to have zero systematic risk, similar to the risk-free asset, that is, having a beta of zero. (i.e. in most cases, we assume the beta of debt to be zero).
Unleveraged beta
The beta of an unleveraged required return (i.e. no debt) on an investment when the investment is financed entirely by equity.
Leveraged beta
The beta of a leveraged required return; that is, the beta as adjusted for the degree of leverage in the firm's capital structure.
Country beta
Covariance of a national economy's rate of return and the rate of return the world economy divided by the variance of the world economy.
Alpha equation
The alpha of a fund is determined as follows:
[ (sum of y) -((b)(sum of x)) ] / n
where: n =number of observations (36 months)
b = beta of the fund)
x = rate of return for the S&P 500)
y = rate of return for the fund)
Regression equation
An equation that describes the average relationship between a dependent variable and a set of explanatory variables.
Fisher equation of exchange
Fisher's equation of exchange states MV = PT. M is the money supply; V is the velocity of circulation; P is average prices and T is the number of transactions. This equation is in fact an identity as it will always be true. At its simplest level you could imagine an economy that has a money supply of £5. If this £5 is on average used 20 times in a year, it will have generated £100 of spending. In the Fisher equation above M would be equal to £5, V equal to 20 and PT would be £100. This £100 coul ...
