Does higher beta mean higher expected return?

The Beta coefficient is a valuable tool for investors looking to diversify their portfolios and manage risk effectively. By incorporating stocks with varying Beta coefficients, investors can balance their portfolios to achieve their desired risk-return profile.

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The concept of Beta coefficient plays a pivotal role in finance, particularly in the analysis of stock returns. It serves as a measure of the volatility of an individual stock relative to the overall market.

A higher Beta coefficient indicates that the stock is more sensitive to market movements, implying a higher potential for fluctuations in its price. Consequently, investors can anticipate a correspondingly higher expected return on such stocks, as they are willing to accept greater risk in pursuit of higher rewards.

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