Finding Beta Research Guide

Beta (β) is a measure of volatility, or systematic risk, of a security or portfolio in comparison to the market as a whole. (Most people use the S&P 500 Index to represent the market.)

Beta is also a measure of the covariance of a stock with the market. It is calculated using regression analysis.

• A beta of 1 indicates that the security's price is expected to move with the market.
• A beta greater than 1 indicates that the security's price is expected to be more volatile than the market.
• A beta of less than 1 indicates that the security's price is expected to be less volatile than the market.

You can think of beta as the tendency of a security's returns to respond to swings in the market. For example, if a stock's beta is 1.2, then it is theoretically 20% more volatile than the market.

Each resource will provide you with varying results for the beta of a security due to differences in the calculations used in each program. These issues are addressed in this guide.

Pull the time series data from WRDS to calculate Beta yourself. See Calculating Beta tab for instructions.