CA. Tejas K. Andharia

Every investor wants to minimize the risk, in relation to the specified level of return.  This risk is measured in the terms of beta co-efficient.  Beta is the relative measure. i.e. beta of particular security or class of securities is measured in relation to the market beta.  Market beta is always deemed to be 1(one).  Thus, if beta of particular security is more than 1(one), it is more risky and consequently the investor would certainly want higher return and vice-versa.

Beta is actually a statistical phenomenon.  If one understands its roots in the statistics, it will never make a mistake in finding and applying the beta in practical terms. Consider the following example.

Year

Return on security “A” Market return

1

25%

21%

2

28%

23%

3

31%

28%

Now we will find out the beta by applying 4(four) different formulae with proper presentation which would help you to the great extent to understand the beta efficiently.

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Author Bio

Qualification: CA in Practice
Company: T. K. ANDHARIA & CO.
Location: BHAVNAGAR, Gujarat, IN
Member Since: 08 Apr 2018 | Total Posts: 28
He is Chartered Accountant by profession plus Song Writer, Composer, Piano player and Singer. One of his hobbies is to share technological knowledge . He was President of Bhavnagar C. A. Association for two consecutive terms. His Youtube Channel is "CA. Tejas Andharia" which contains videos on vario View Full Profile

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