REFS is
a mine of invaluable information for the private investor.
Selecting shares without its help is like trying to
clap with one hand tied behind your back.
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Beta relative
Description
A beta relative
measures the price volatility of a share relative to the price
volatility of a portfolio which includes it.
In Company
REFS this portfolio is the notional market portfolio, represented
by the FTSE Actuaries All-Share Index. Therefore in Company
REFS, the beta relative measures the average amount, over
time, by which the share price moves more, or less, than the
Index. A share with a beta relative of 1.00 moves, on average,
in the same direction, and by exactly the same percentage, as
the Index.
Calculation
The beta
relative calculation requires a time-series of share price values,
and a comparable time-series of portfolio, or Index, values.
Such a time-series can be varied to suit the prevailing circumstances
and requirements, but, once chosen, must be consistently applied
to allow valid comparisons to be made. In Company REFS
this time-series consists of price and Index values measured
at monthly intervals over a period of two years.
Some hypothetical examples of extreme situations
A full illustration & technical description of the beta
relative calculation
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