beta is a historical measure of the risk an investor is exposed to by holding a particular stock or portfolio as compared to the market as a whole. the beta of a share in casey's corn company is 0.5. this means that casey's has historically been 50% less volatile than the market. so, if the market moves up by 10%, casey's stock will only appreciate 5%. if the market declines by 2%, casey's corn will lose only 1% of its value. the change in market value is multiplied by a stock's beta to estimate its movement. the risk and reward trade-off suggests that high beta stocks have a greater risk, and, as a result, a higher expect of return. if casey's has a beta of 1.5, it will ? be 50% more volatile than the market. this means it is likely to gain 15% when the market gains 10%, and lose 3% when the market drops 2%. a stock with a beta of 1 will move in tandem with the wild market. both low and high beta stocks have their place in a portfolio. low beta stocks are stable. their performance is weaker than the market as a whole when the stock market is strong, but when the market drops these stocks usually experience less dramatic declines. high beta stocks are the opposite. they outperform when the market is strong, and fall further when the market declines. however, it is important to remember that the beta is a historical measurement, so it can't predict the future. the beta of a stock will change as more historical data points are added, and many such events will prove to be entirely unpredictable. beta is a useful measure for investors, because it helps them create portfolios that match their risk tolerance.
- risk tolerance・・・リスク許容度