Professional Documents
Culture Documents
Systematic Risk Capital Asset Pricing Model: Interpreting Beta
Systematic Risk Capital Asset Pricing Model: Interpreting Beta
Interpreting Beta
The sensitivity of an asset’s return to the market return is referred to as the asset’s
beta. The beta is simply is measure of the sensitivity of a stock to market
movements. It is the standardized measure of the covariance of the asset’s return
with the market return. Beta can be calculated as follows for the period from t=1
to t = n