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Pastimes : Bad investing information/advice on the net contest
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To: Edwarda who wrote (106)10/7/1999 11:39:00 PM
From: The Other Analyst  Read Replies (1) of 214
 
Let's see how Quicken did in its glossary

Beta coefficient

A measure of a stock's volatility relative to the overall stock
market. The beta coefficient of the S&P 500 is 1. Any stock that
is more volatile than the market as a whole has a beta value
higher than 1. If the beta coefficient is less than 1, the security is
considered to be less risky than the market. Conservative
investors ideally seek to invest in stocks with low beta
coefficients, whereas investors willing to take more risk seek to
invest in high-beta stocks.

Again they have confused risk and beta. Beta measures systematic risk. Volatility measures risk. A stock could have very high volatility, but beta less than one.

And what does Quicken say about volatility?
Volatility

Measurement of the propensity of a stock, bond, mutual fund,
commodity, or market to rise or fall sharply in price. Various
factors may make a stock or mutual fund volatile. Variation
based on the intrinsic values of a security, as opposed to general
market conditions, is measured by the alpha coefficient. The
beta coefficient measures the volatility of a stock relative to the
overall market.

They started off ok, but the part about alpha is just plain wrong. Beta measures variability of a stock relative to the market, not volatility. And what is this "variation based on the intrinsic values" stuff. Anyone want to try and explain that? And to nit-pick a bit, the word "sharply" in this definition is inappropriate.
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