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Essay / Research Paper Abstract
A 3 page paper discussing beta and investment. Beta is a term found on all web pages providing quotes of individual stocks. Often thought of as a measure of risk of the stock, it does not directly reflect risk at all. It is an integral component of the capital asset pricing model (CAPM), which is used to place a value on assets. The purpose here is to investigate beta and what it means to the individual investor. The reference company is McDonald's; other companies used for example purposes are IBM and Microsoft. Bibliography lists 5 sources.
Page Count:
3 pages (~225 words per page)
File: CC6_KSfinBetaRsk.rtf
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Unformatted sample text from the term paper:
a term found on all web pages providing quotes of individual stocks. Often thought of as a measure of risk of the stock, it does not directly reflect risk
at all. It is an integral component of the capital asset pricing model (CAPM), which is used to place a value on assets. The purpose here is to
investigate beta and what it means to the individual investor. The reference company is McDonalds; other companies used for example purposes are IBM and Microsoft. 1. What does this beta
mean in terms of your choice of including this company in your overall portfolio? As stated, the reference company is McDonalds. Its
current beta as posted at PCQuote.com is 1.328, meaning that its stock price changes to a greater degree than does the overall movement of the market. Though beta often
is thought of as being a measure of risk, it is not. It reflects only the stocks volatility, the degree to which the movement of the price of the
stock of a firm deviates from the overall movement of the market. When the stock of a firm deviates from the market in favorable terms, the rewards to current
shareholders can be enormous. By definition, the movement of the market is 1.0. Beta provides reference to that movement and places the
volatility of an individual stock relative to the movement of the market. McDonalds current beta is 1.328, meaning that it fluctuates more than only slightly more than the market
in general. IBMs current beta is 1.687, which means that its stock is likely to move more than market average to a greater degree than McDonalds. On the
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