What is Beta?
A measure of a stock's volatility relative to the broader market.
Formal Definition
Beta quantifies a stock's sensitivity to movements in a market index, typically the S&P 500, as the slope of the stock's returns regressed on market returns. A beta of 1.0 moves with the market; 1.5 is 50% more volatile; 0.5 is half as volatile. High-beta names are common among growth, technology, and small-cap stocks.
In Simple Terms
It measures how jumpy a stock is compared to the overall market. A beta above 1 means it swings harder than the market both up and down; below 1 means it is calmer.
Example
If the S&P 500 rises 2% and a stock with beta 1.3 rises 2.6%, the stock is performing as expected given its beta.