Posted by johnny cash > 2014-01-04 18:40 | Report Abuse

yes i notice many analyst does not use beta in their reports..most common ones are EPS,, ROE

Posted by johnny cash > 2014-01-04 18:42 |

Post removed.Why?

Posted by Pak Lah > 2014-01-04 22:13 | Report Abuse

Crazy and fanatic. That's what I can say.

Posted by yfchong > 2014-01-05 07:59 | Report Abuse

Dear bro KC, your article is good and well explained.

Posted by keanpoh > 2014-01-18 01:18 | Report Abuse

kcchongnz, beta does explain the relationship of a stock (or portfolio) return with the market risk (non-diversifiable risk). But when studying the beta, one should also consider the R-square, which measures how much the beta can be used to explain its relationship with the market risk.

I would use the beta as a simple guide or quick reference as to how risky (or volatile) the stock might be with reference to the historical return and that's all. Also note that the beta value changes as the historical time frame is used to run the regression. Furthermore, using a daily return, weekly return or monthly return for the regression will yield significant difference in the value of the beta. Daily return beta covers more information but is also affected by more noise. Maybe a monthly return beta is a better estimate.

Posted by kcchongnz > 2014-01-18 06:25 | Report Abuse

keanpoh,

Excellent comments.

Many research has shown the anomalies in stock returns as opposed to the proposition of efficient market hypothesis and capital asset pricing model. Intuitively, I can't imagine the riskiness of a stock is governed by its volatility of its against the market return. But anyway, beta may be used just as a guide. Beta clearly has not explained well in the return of my portfolio above.

I am convinced that other factors such as price-to-book value, Price-to-cash flow, price-to-earnings, size effects and others would have more profound in the long-term return of stocks.

Posted by lazynovice > 2014-10-01 18:44 | Report Abuse

Here it raises the question of whether beta (which is calculated based on historical data) is a reliable reference for future return, and according to your calculation above, it shows that it is likely not the case. However, your calculation is only based on data over a 1-year period, so i think it would be very interesting to make the same calculation again for the same portfolio over a longer period, maybe 3/4-years period?

Posted by JeevS > 2014-12-17 00:40 | Report Abuse

Use adjusted beta, beta(new) = 0.67+beta*0.33 It will bring the value closer to 1 if you use daily or weekly data.

Posted by kcchongnz > 2014-12-17 09:31 | Report Abuse

Think about it, may be Beta has some use in stock investing. When the market is expecting to go up, buy stocks with high beta. When the pendulum is higher up, change to lower beta stocks.

One can use JeevS's adjusted beta, may be.

Posted by paperplane > 2020-09-09 08:43 | Report Abuse

beta?what beta