[Economy] Beta Value of a Stock vs Sharemarket Movement asked in UPSC Prelims 2023 #ITC #Zomato

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Издатель Jun 4, 2023

Beta value is a measure of a stock/share’s volatility relative to the market. A beta of 1 means that the security's price moves in the same direction as the market, while a beta of greater than 1 means that the security is more volatile than the market. A beta of less than 1 means an inverse relation to the market. Such an investment tends to increase in price when the general market price falls and vice versa.

In the context of sharemarket fluctuation, beta value can be used to assess the risk of a particular investment. A high beta security is more likely to experience large swings in price, while a low beta security is less likely to experience large swings in price.

The beta value of a security can be calculated using historical price data. However, it is important to note that beta value is not a perfect measure of risk, as it does not take into account other factors that can affect the price of a security, such as changes in profitability of the company or general economic conditions or war.

In the UPSC Prelims-2023, a question was asked about the beta value of a particular security.
Question was: In the context of finance, the term ‘beta’ refers to
(a) the process of simultaneous buying and selling of an asset from different platforms
(b) an investment strategy of a portfolio manager to balance risk versus reward
(c) a type of systemic risk that arises where perfect hedging is not possible
(d) a numeric value that measures the fluctuations of a stock to changes in the overall stock market

The correct answer to the question was (D)
This video provides an overview of beta value and its role in sharemarket fluctuation.

Beta value, Sharemarket fluctuation, UPSC Prelims, Risk assessment, Share prices,ITC,CA Rachana Ranade,