SoftwareStocks.com

101 Stock Market Investing - Finding Stock Market Industry Beta

Stock Market Industry Beta is the measure of how a stock?s trading price moves compared to the market as a whole. Knowing this figure one can understand how volatile a stock is. A beta of 1 means a stock?s price fluctuates exactly as much as the market. A beta less than 1 means a stock is less volatile than the market and a beta greater than 1 means that stock is more volatile than the market.

Betas can be determined for entire industries also. The ?industry beta? would compare the volatility of the industry relative to the whole market. For example, technology stocks tend to be more volatile than the industry so the beta would be more than 1, generally.

To calculate industry beta you need some historical data of the price of the industry stock and historical price data of the entire market. For example if you were going to calculate beta over the last year for compare technology stocks versus the S&P 500, you would first gather the historical data you need. Next, determine the movements of the two prices after each trading day. This will give a percentage change versus the previous day. Once we have 365 of these we can average the group to determine the average move each made over the last year. We can call the average industry movement Ri and the average market movement Rm. Finally, divide the technology industry?s average movement by the S&P?s average movement and we will have an outcome that is less than 1 (less volatile), 1 (equally volatile), or greater than 1 (more volatile). Written out this function looks like this:

Β = Ri / Rm or B = Covariance(Ri , Rm)/ Variance(Rm)

Beta can be useful in stock research when judging how risky a stock is versus a stable investment with a guaranteed rate of return. It must be noted that the longer period of time the beta is acquired the more accurate that beta will be. Also, betas are more valuable when used with stocks that have a long record of high volume trading. Smaller stocks that don?t trade a lot can fluctuate wildly on a busy day and throw the beta out of whack for the period being measured.

Don't miss out the secrets of finding stock volatility information when you visit http://www.tradingsphere.com

MORE ARTICLES:

How Does a Stock Market Crash?
Have you ever wondered "how does a stock market cash" or "is it possible to take advantage of a stock market crash" Did you know that it is easier to make money during a stock market crash than it is during a raging bull market ý Why

Trading Options: How To Deal With The Unpredictable Nature Of The Stock Market
The stock market is known for being a place where companies and individuals can raise money. It is a place where companies can raise more capital for expansion by selling shares of ownership of the company in a public market. The stock market has been a perfect destination for investments since it caters to a smooth transaction for the selling, delivering and collecting payment for the stocks being sold. This is part of the reason why the stock market has remained as the best place to accumulate wealth and fortune for many businesses and individuals. What makes it more attractive, is that investors are provided with liquidity that can enable them to quickly and easily sell stocks at their own risks.

Penny Stock Trading: 7 Important Tips on Penny Stock Trading
Investing in the stock markets has become the alternative of trying to make an extra buck Investing in stocks is like having a second job hoping to get extra finances for a rainy tomorrow

Stock Market Tips: A Great Way for Boosting your Trading
The stock market has a very old history. The concept of stock market was introduced back in thee 12th century. It all started in France when agricultural communities were in debt and a market was established to manage the debt. This all was done in assistance with the banks and the people who are involved in it are called brokers. This was just the beginning and today stock market deals with any sort of material trading. It’s a very large trading market, involving a large of group of people working within the network.

Marl Stock Trading Robot Review - Find Out if Marl Stock Robot is a Scam?
If the stock markets are your area of expertise, then most definitely you know the troubles of using stock trading robot to be able to earn net income in foreign exchange and stock markets online There has been a lot of controversy created by stock trading robot software scams and because of that people are now unsure of which stock trading robot package is the best deal and can help them generate cash flow

7 Easy Stock Market For Beginner Tips from StockMarketsMadeSimple.com
The stock market can be a scary place for beginners. Some people think the stock market is a good place to make some easy money fast. Nothing could be further from the truth. The stock market for beginners is a place fraught with short-term promises, but in reality making money on the stock market takes two things: a good sense of money management and sound research. 7 Easy Stock Market For Beginners Tips to help get new investors started revealed.

How Might the 2008 Market Crash End?
The stock market crash of 2008 is the worst that the world has ever seen in terms of the number of points erased from the major indices At its lowest point to date, the Dow Jones Industrial Average has lost a historical 6749 points

How Does the Stock Market Work?
How does the stock market work How do investors use the stock trading to increase their wealth