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Importance of beta

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What is the importance of beta?

Would a prudent investor want to invest in a stock with a high beta, low beta or somewhere in between?

Why?

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Solution Summary

This posting explains the importance of beta and its use by investors while selecting stocks.

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A stock's beta is a statistical tool that measures the sensitivity of its return to market returns or the volatility of a stock in comparison to the volatility of the market. It is one of the most popular indicators of risk in stock analysis and valuation.

A beta of one will happen when the stock price moves with the market (or the stock index say S&P 500). Beta value's ...

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