- published: 06 Sep 2012
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In finance, the Beta (β) of a stock or portfolio is a number describing the volatility of an asset in relation to the volatility of the benchmark that said asset is being compared to. This benchmark is generally the overall financial market and is often estimated via the use of representative indices, such as the S&P 500.
An asset has a Beta of zero if its returns change independently of changes in the market's returns. A positive beta means that the asset's returns generally follow the market's returns, in the sense that they both tend to be above their respective averages together, or both tend to be below their respective averages together. A negative beta means that the asset's returns generally move opposite the market's returns: one will tend to be above its average when the other is below its average.
It measures the part of the asset's statistical variance that cannot be removed by the diversification provided by the portfolio of many risky assets, because of the correlation of its returns with the returns of the other assets that are in the portfolio. Beta can be estimated for individual companies using regression analysis against a stock market index.
Beta (UK /ˈbiːtə/ or US /ˈbeɪtə/; uppercase Β, lowercase β; Greek: Βήτα Bḗta) is the second letter of the Greek alphabet. In Ancient Greek, beta represented the voiced bilabial plosive /b/. In Modern Greek, it represents the voiced labiodental fricative /v/.
The letter Beta was derived from the Phoenician letter Beth . Letters that arose from Beta include the Roman letter ⟨B⟩ and the Cyrillic letters ⟨Б⟩ and ⟨В⟩.
In the system of Greek numerals Beta has a value of 2.
Like the names of most other Greek letters, the name of beta was adopted from the acrophonic name of the corresponding letter in Phoenician, which was the common Semitic word *bayt ('house'). In Greek, the name was βῆτα bêta, pronounced [bɛ̂ːta] in Ancient Greek. It is spelled βήτα in the modern monotonic orthography, and pronounced [ˈvita]. In English, the name is pronounced either /ˈbeɪtə/ (US) or /ˈbiːtə/ (UK)).
In computing the term 'beta' is used as (usually) the last pre-release in the Software release life cycle. It is sometimes referred to as 0.x in version numbers or x.x bx where x represents a number.