Beta is a measure of systematic (or market or non-diversifiable) risk of a particular security. It is defined as the volatility of the security relative to the overall market and is calculated by regression analysis.

Beta is the covariance between the securities returns and the market returns divided by the variance of the market portfolio= Covariance (ri, rm) / Variance of the Market.

The overall market has a beta of 1. A security with a lower (higher) beta is less (more) volatile than the market.

Beta is an input to the capital asset pricing model (CAPM) used to calculate the required return on a security.

A more comprehensive content for the concept will be available later.

We will include related examples and CFA questions that are also hyperlinked to the appropriate definitions.