What does the term “Beta” mean?
The term “Beta” refers to the volatility of a given investment vehicle. For instance, if a security moves up 10% when the S&P 500 Index moves up 10% and moves down 10% when the S&P 500 Index moves down 10% then the security is said to have a Beta of 1.0. But, if the security moves up 20% when the S&P 500 Index moves up only 10% and moves down 20% when the S&P 500 index moves down only 10% then the security is said to have a Beta of 2.0. A Beta volatility number can be assigned to any security according to its price movement in relation to the S&P 500 or other market index.
