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What Is Beta?

Beta measures how closely the price movement of an individual stock or fund tracks the movement of the overall market (such as a broad market index).

A beta of 1 indicates price movement roughly in line with the overall market; a beta greater than 1 suggests a tendency to move more than the market; and a beta less than 1 suggests a tendency to move less than the market. A negative value indicates a tendency to move in the opposite direction from the overall market.

How to read the figure

  • Beta > 1: tends to move more than the market average
  • Beta = 1: tends to move roughly in line with the market average
  • Beta < 1: tends to move less than the market average

Points to keep in mind

Beta is a statistical measure calculated from historical price data, and it does not guarantee that the same relationship will continue in the future. The figure also varies depending on the calculation period and the index used for comparison.

This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.

Frequently Asked Questions

Does a high beta mean a stock is high-risk, high-return?
In general, a higher beta is thought to indicate a larger swing relative to the overall market. However, it is a metric based on past data and does not guarantee future price movements.
Where can I find a stock's beta?
It is sometimes published on brokerage stock-information pages or various stock-data websites. Since the figure can differ depending on the calculation period used, it is a good idea to check the source.

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