28 April 2011
1.I am wondering what do u exactly mean when the beta of a company is 1 ?? 2.Can the beta of a security be 0??how does that happen? 3.what is the beta for risk free security??
Please explain in detail coz i wanna get the concept....Thanx in advance..
if the beta is 1..means the security of the company bears the same risk as the market does coz its share prices move as per the market index...
If the beta is 0, the market movements have nothing to do with the company's securities' prices...so there is no risk involved...
This is the case with goverment securities which we assume to be risk free(i assume no adversities in the givernment as in case of Libya at the moment..)..So, Government securites have the beta 0..Whatever be the situation of the market, return is guaranteed...