Glossary · Defined term
Beta
Beta measures how much an investment's price moves relative to the overall market, where the market's beta is 1.0.
Last updated Oct 2, 2026
What it means
Beta measures how much an investment's price tends to move relative to the overall market. By definition the market itself has a beta of 1.0, so a stock with a beta of 1.5 has historically moved about 50 percent more than the market in either direction, while a beta of 0.6 implies gentler swings. Beta is calculated from past price data, usually by comparing the stock's returns against a market index. High-beta stocks tend to amplify market moves, which can magnify both gains and losses. Because beta looks backward, it describes how a stock behaved, not a guarantee of how it will behave next.
An example
For illustration, if the market rises 10 percent and a stock with a beta of 1.3 rises 13 percent, then falls 13 percent when the market drops 10 percent, the stock is behaving in line with its beta. An investor using beta would expect that stock to be noticeably jumpier than the market average.