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Beta is an asset’s volatility relative to “the market.” An asset with a beta coefficient of 1.0 has tended to experience up and down movements of roughly the same magnitude as the market. One with a beta of 1.2 has tended to gain roughly 20% more than the market during rising periods, and has tended to experience declines 20% more severe than the market during periods of falling prices. The name “beta” refers to the “b” (the “slope”) in the linear equation Y= a + bX.
