Investing word of the day: Beta

See all awesome STOCK REPORTS in PinoyInvestor! (size 280x280)

I always see this word in the analysis of finance websites like and but when I searched what is it and what use is it for me Investopedia‘s video has answered all my questions. So see the video below and learn how you can use Beta in your stock trades.

Oops I know you didn’t quite get it so let me explain.

Beta coefficient or simply Beta is a measure of volatility or risk as compared to the market as a whole. Philippine listed stocks are compared to the PSEi to compute their Beta.

In a way it is a multiplier which uses the PSEi as the base comparison.  As the video said it is a way of knowing the movement of the stock as compared to the base it is compared to. Below is the generalized assumption as quoted from

A beta of 1 indicates that the security’s price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security’s price will be more volatile than the market. For example, if a stock’s beta is 1.2, it’s theoretically 20% more volatile than the market. 

To sum it up:

If Beta is = 1 stock follows the trend of the PSEi
If Beta is > 1 stock is more volatile than the market thus  
If Beta is
                   moving than the market but stable

Financial Freedom Advocate About the blogger

Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Check him out in Google+ Learn more about Louis and his financial freedom advocacy here.

Enjoyed this post? Please consider leaving a comment , subscribing to the RSS feed, or join our email list .
See all awesome STOCK REPORTS in PinoyInvestor! (size 280x280)

Your ideas, opinion, and contributions to the topic will help us learn more ways towards financial freedom! Please leave some in the box below and make our quest more exciting!

%d bloggers like this: