What does beta mean in finance?

In statistical terms, beta represents the slope of the line through a regression of data points. In finance, each of these data points represents an individual stock's returns against those of the market as a whole. Beta effectively describes the activity of a security's returns as it responds to swings in the market.

What is equity beta & asset Beta?

Equity beta (also called levered beta) compares a leveraged company’s estimate risk to that of a broader market. This calculation takes into consideration the risk of the business as well as the risk of the business’ debt. Asset beta (also called unlevered beta) refers to the comparison of a company that does not take its debt into consideration.

What is beta data & why is it important?

Beta data about an individual stock can only provide an investor with an approximation of how much risk the stock will add to a (presumably) diversified portfolio. For beta to be meaningful, the stock should be related to the benchmark that is used in the calculation. The S&P 500 has a beta of 1.0.

What does a beta value less than one mean?

A beta value less than one means that the stock is less volatile than the market. For example, if the market goes up by 10%, the stock might only go up by 5%. Moreover, this means security is not as volatile as the market. So by adding a stock with this beta value, you are making your portfolio less risky.