What is beta in finance?

[Sinvelen]

I’ve been reading about investing and keep seeing the term beta in finance, but I'm not exactly sure what it means. From what I understand, beta measures how much a stock moves compared to the overall market — like whether it’s more volatile or more stable. For example, a beta higher than 1 supposedly means the stock is more volatile than the market, and a beta lower than 1 means it’s more stable. But how is beta actually used when making investment decisions? And does a higher beta mean higher risk but potentially higher return?

 

[Selina]

Beta‍‌‍‍‌‍‌‍‍‌ is a financial term that shows the extent of a stock's price change in comparison to that of the general market. If a stock has a beta of more than one, it indicates that the stock is more volatile than the market, if it is less than one, the stock is considered to be more stable, and the term is essentially used to comprehend the level of risk and to foresee the company a stock might react to market ‍‌‍‍‌‍‌‍‍‌changes.

 

[Caius]

Beta in finance measures how much a stock or asset moves compared to the overall market. A beta above 1 means higher volatility, while below 1 means lower volatility.

 

[Oscar]

In finance, beta is used as an indicator of the volatility of an asset in relation to the market. It depicts the tendency of the price of a stock to change when the market changes. Beta greater than 1 indicates that the asset is more volatile and is most likely to oscillate more than the market. A beta of less than 1 is less volatility and more stable prices. A negative beta refers to the opposite movement of the asset to the market. Beta helps investors to comprehend the risk, as well as to assess how an investment can perform when the market is fluctuating.

 

[John Smith]

Beta measures a stock’s volatility compared to the overall market. A beta above 1 means the stock is more volatile; below 1 means it’s less risky. Investors use beta to assess market-related risk, estimate expected returns, and build balanced investment portfolios. It helps determine how a stock may move during market shifts.