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Corporate Risk: How would you describe beta? When would you use beta?

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How would you describe beta? How does beta assist in identifying the different levels of risk? When would you use beta?

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Solution Summary

This 331 word solution explains how beta is used in identifying the different levels of risk.

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Beta is a measure of systematic risk and is measured using the covariance of a securities return with the market in relation to the variance in market returns. Beta measures the risk of a security which cannot be diversified away. A security with beta greater than 1 is more risky that the market and a security with beta less than 1 is less risky than the market.

Beta helps in identifying different levels of risk ...

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