Beta
Beta is a measure of an asset’s sensitivity to movements in the overall market, conventionally assigning the market portfolio a value of one.
Build a Robo-Advisor with Python (From Scratch)
Beta is a measure of an asset's sensitivity to movements in the overall market, with the market portfolio conventionally assigned a beta of one.
- How it is used
- Estimates CAPM expected returns for asset-allocation inputs by scaling the market risk premium.
- How deep it goes
- Defines beta, interprets low and high values, and implements an excess-return OLS regression without detailing regression diagnostics.
- Examples
- Uses AAPL, FE, and WMT, SPY market data, 3-month T-Bill rates, and an AAPL beta of 1.3187.
- What you can do after
- Apply it via pandas-datareader, yfinance, and statsmodels to estimate beta and calculate CAPM expected returns.
Read how Build a Robo-Advisor with Python (From Scratch) explains beta →
Investing for Programmers
Beta is a measure of an asset's sensitivity to movements in the overall market.
- How it is used
- Uses beta to compare market sensitivity and inform risk assessment, portfolio choices, and predefined responses to changing risk levels.
- How deep it goes
- Defines three beta ranges and illustrates them with companies, but does not derive or calculate beta from price data.
- Examples
- Compares NVIDIA at 2.12 with Walmart at 0.69 and relates their beta values to technology and supermarket demand.
- What you can do after
- Evaluate an asset’s relative market sensitivity and distinguish market-linked volatility from company-specific risk.
Related concepts
- capital asset pricing modelused by · The capital asset pricing model is a financial model that estimates an asset's expected return from the risk-free rate, market expected return, and the asset's sensitivity to market returns.
- slopeequivalent to · Slope is the rate at which a dependent quantity changes relative to an independent quantity, often represented by a line’s gradient or a coefficient in a linear relationship.
- volatilitymeasures · Volatility is the degree or frequency with which a quantity, condition, or system varies or changes over time.
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