Santosh Mahato (CA student) (207 Points)
01 October 2010Dear friends,
Can any one tell me the difference between systematic risk and Beta security?
If beta is also systematic risk then why not we calculate beta when question ask for calculation of systematic risk?
Joey Tribbiani
(fdg)
(2010 Points)
Replied 01 October 2010
i think u want to say beta of a security
The β (beta) of a security is essentially a measure of the strength of the relationship between the price of a security and the market.
Where as systematic risk refers to variability in return on investment due to market factors.
Hence u can say that beta is a measure for price vulnerability whereas systematic risk measure for for returns
Santosh Mahato
(CA student)
(207 Points)
Replied 01 October 2010
| Originally posted by : A student | ||
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i think u want to say beta of a security The β (beta) of a security is essentially a measure of the strength of the relationship between the price of a security and the market. Where as systematic risk refers to variability in return on investment due to market factors. Hence u can say that beta is a measure for price vulnerability whereas systematic risk measure for for returns |
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My question is regarding Portfolio management of SFM Paper of CA final.
Your language is bookish language. can you clearify it in simple language.
Joey Tribbiani
(fdg)
(2010 Points)
Replied 01 October 2010
| Originally posted by : Santosh Mahato | ||
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Originally posted by : A student i think u want to say beta of a security The β (beta) of a security is essentially a measure of the strength of the relationship between the price of a security and the market. Where as systematic risk refers to variability in return on investment due to market factors. Hence u can say that beta is a measure for price vulnerability whereas systematic risk measure for for returns My question is regarding Portfolio management of SFM Paper of CA final. Your language is bookish language. can you clearify it in simple language. |
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If i am not wrong there is nothing like Beta security in SFM,If there is smthng lyk dat,den plz clarify
Santosh Mahato
(CA student)
(207 Points)
Replied 01 October 2010
How can you say that there is nothing like beta security in SFM, if you are a CA final student.
We will study it in Portfolio management
Formula:
Beta security = Co-variance between security & market / variance of market
Gunjan Mittal
(article)
(47 Points)
Replied 01 October 2010
Systematic risk is basically effect of economy on the entire market and Beta is a measure to control that risk.
Joey Tribbiani
(fdg)
(2010 Points)
Replied 01 October 2010
| Originally posted by : Santosh Mahato | ||
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How can you say that there is nothing like beta security in SFM, if you are a CA final student. We will study it in Portfolio management Formula: Beta security = Co-variance between security & market / variance of market |
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there is a mis print in ur book,the formula u r qouting is of calculating BETA "OF" A SECURITY
Santosh Mahato
(CA student)
(207 Points)
Replied 01 October 2010
ok dear
Beta security and beta of a security is the same thing
CA Nagendra
(CA)
(1788 Points)
Replied 01 October 2010
Systematic risk is the risk associated with aggregate market and it is due to factors that affect the entire market. Some of the factor is: recession, Wars, Change is Taxation provision, foreign investment policy, Inflation etc.
This risk is beyond the control of investor and hence cannot be mitigated through diversification.
We can say that the risk of failing CA Student due to the reduced “%” result by ICAI is Systematic risk for CA Student and it cannot be reduced by students own effort.
Unsystematic risk is the risk specifically associated with company/industry and it is due to factors specific to a company/industry.
Some of the factor is: abour strike, Product category, marketing strategy, research & development etc.
Unsystematic risk can be mitigated through portfolio diversification.
We can say that the risk of failing CA Student due to inadequate and unbalanced preparation of all subjects is Unsystematic risk for CA Student and it can be reduced.
Beta is a measure of firm’s systematic risk or non diversifiable risk. The sensitivity of a security to market movements is called Beta. In India, market is represented by SENSEX and NIFTY.
Answer to your 2nd question:
Even β measures systematic risk, we do not calculate β when question ask for calculation of systematic risk. Because we have to calculate systematic risk in “%” term. But β is in times term.
Suppose, EBT is 1.5 times of EAT, and EAT is 12% then what is EBT?
Here, EBT = EBT X EAT
i.e. EBT = (1.5 X 12%) = 18%.
Similarly, if beta is 1.5 times; means systematic risk is 1.5 times of market risk σ market
Hence, Sys Risk = σ2market X β2sec.
Max Payne
(employed)
(2574 Points)
Replied 01 October 2010
| Originally posted by : A student | ||
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i think u want to say beta of a security The β (beta) of a security is essentially a measure of the strength of the relationship between the price of a security and the market. Where as systematic risk refers to variability in return on investment due to market factors. Hence u can say that beta is a measure for price vulnerability whereas systematic risk measure for for returns |
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Santosh Mahato
(CA student)
(207 Points)
Replied 01 October 2010
Joey Tribbiani
(fdg)
(2010 Points)
Replied 01 October 2010
| Originally posted by : Santosh Mahato | ||
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ok dear Beta security and beta of a security is the same thing |
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mere bhai,agli baar post me baat puri likhna. Actually i hv completed SFM n u being so confident of this beta security concept that kuch der k liye main dar gaya aur sochne laga ab kaunsi book se karu. Pz bhai,dil ka kamzor admi hu 
Santosh Mahato
(CA student)
(207 Points)
Replied 02 October 2010
Punit Gupta
(Advocate and Consultant-Tax Finance & Investments)
(310 Points)
Replied 02 October 2010
bharat Puppala
(apprentice)
(25 Points)
Replied 28 February 2012
Systematic risk, is the non-diversifiable portion of risk. Its statistical formula is (s.d) multiplied by Corr Coeefficient of stock and market.
Beta is the relative measure of this systematic risk of any stock in relation to systematic risk of market. That is why its value will be the above calculated value divided by S.D of market (s.d of stock/s.d of market * Corr)
Beta, precisely is not systematic risk absolutely. It is relative to market risk. That is why we multiply Beta with market risk premium to obtain stock's risk premium.
Got it?
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