Beta (financial elasticity)

Description

In finance, the beta (β) of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. Beta is the financial elasticity or correlated relative volatility, and can be referred to as a measure of the sensitivity of the asset’s returns to market returns.

Related formulas

Variables

βBeta (financial elasticity) (dimensionless)
ρabThe correlation of the return of the asset and the return of the benchmark (dimensionless)
σaThe volatility of the return of the asset (dimensionless)
σbThe volatility of the return of the benchmark (dimensionless)