beta coefficient


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Beta coefficient
This article discusses the 'beta coefficient' as used in economics. For a more basic statistical term often used in regression, see standardized coefficient. The Beta coefficient, in terms of finance and investing, is a measure of a stock (or portfolio)’s volatility in relation to the rest of the market. Beta is calculated for individual companies using regression analysis. (See Investing below)
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Beta Coefficients
The Beta coefficients are the regression coefficients you would have obtained had you first standardized all of your variables to a mean of 0 and a standard deviation of 1. Thus, the advantage of Beta coefficients (as compared to B coefficients which are not standardized) is that the magnitude of these Beta coefficients allow you to compare the relative contribution of each independent variable in the prediction of the dependent variable.
See also, the Multiple Regression chapter.



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