Portfolio Beta

Categories: Finance,

Used in the context of general equities. The beta of a portfolio is the weighted sum of the individual asset betas, according to the proportions of the investments in the portfolio. E.g., if 50% of the money is in stock A with a beta of 2.00, and 50% of the money is in stock B with a beta of 1.00,the portfolio beta is 1.50. Portfolio beta describes relative volatilityof an individual securities portfolio, taken as a whole, as measured by the individual stock betas of the securities making it up. A beta of 1.05 relative to the s&p 500 implies that if the S&P's excess return increases by 10% the portfolio is expected to increase by 10.5%.