Did you know_ the beta value of your portfolio – livemint market risk premium 2016
Investing in market-linked products involves returns and risk. Market liquidity risk management Returns refer to the change in the value of your initial investment amount. Market risk jobs singapore Risk is intangible and refers to the volatility in returns. Market risk in banks This risk is irrelevant when it comes to traditional fixed-income investments like deposits, but matters for determining the value of market-linked investments like mutual funds. Global solutions group Beta compares the volatility of your investment to a standard market benchmark.
A portfolio’s beta reflects the change or deviation of the fund’s returns, compared to returns from the benchmark. Managing the risks of organizational accidents It also refers to market risk, as it measures how closely your portfolio’s returns correlate
with that of the benchmark: whether your portfolio follows market movement. Market risk management in banks ppt A beta of 1 means that your portfolio’s movement, or change, is similar to the change in the benchmark. Global solutions A beta of less than 1 means that the stock or portfolio is less volatile.
For example, if the benchmark index rises 2%, the portfolio with a beta of less than 1 will rise less than 2%. Definition of stock market A beta of close to zero means that returns don’t follow the benchmark’s returns. Market risk reporting So, higher the beta, more your returns deviate from the benchmark. Risk in stock market Riskier portfolios tend to exceed market returns on the upside and downside.
Beta helps you evaluate whether you want to pick a fund that can outperform the market during a rally—with the risk of underperforming more during a crash. Var market risk Or if you want a fund with lower beta, whose performance is more stable even though it may get left behind during rallies. Market risk in banks ppt Beta also helps to compare the performance of fund managers.
Risk-adjusted returns can be calculated using portfolio beta and these will help understand which fund compensates better through returns, for it’s level of risk.
Expect a high margin of outperformance or underperformance against the benchmark from a high-beta portfolio and less volatility from one which has a beta less than 1.
Portfolio beta is a function of stock selection versus the benchmark, and where there is an overlap in stocks, it is also influenced by weightages assigned to each stock relative to that of the benchmark.