Registered User
Joined: 1/1/2005
Posts: 2,645
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It is sometimes suggested that if the Beta of a stock is near one, then the price movement of the stock is "similar" to that of SP-500. Our purpose is to point out that this is not true. If the price movement of the stock is "similar" to that of SP-500. then the Beta is near one.
If one has a basic knowledge of Finite Dimensional Vector Spaces, then the formula for Beta will reveal that the above is true. Users of TeleChart cannot be expected to have such knowledge. The question is as a practical matter is the above true?
The following is a list of Beta values for selected symbols as of 03/19/08:
Symbol Beta
SPY 0.99
SSO 1.97
SDS -1.89
DIA 0.95
QQQQ 1.59
I doubt there are any surprises to anyone here.
Please bring up the All Stocks WatchList and sort by Beta. Use a split screen Layout with SP-500 in the bottom screen. Choose Logarithmic Scale, Monthly Time Frame, and Zoom 6. Now space through those stocks with Beta values near one. I believe most would agree that the price movement of many look similar to that of SP-500, but some do not. For example, EDEN, GB, and SCOXQ do not.
The three stocks listed look so different from SP-500, I would be inclined to check the computation of their Beta values.
Any comments will be appreciated.
Thanks,
Jim Murphy
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Registered User
Joined: 1/1/2005
Posts: 2,645
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Addendum:
Since 60 months is the period used to calculate Beta, it is suggested that a Linear Regression Line of Period 60 be placed on Prices.
Thanks,
Jim Murphy
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