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Technology Stocks : Internet Analysis - Discussion
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To: Chuzzlewit who wrote (69)2/2/1999 11:07:00 PM
From: Steve Robinett  Read Replies (2) of 419
 
CTC,

You comment, With regard to CNPEG2, I too am uncomfortable with the inclusion of betas in the calculation for a variety of reasons mostly related to how good a surrogate it is for risk.

Why use beta? Use volatility. Beta measures the stock's movement relative to the general market. When investors pay up for high growth stocks with pie-in-the-sky prospects, they are not trying to keep a low beta portfolio, in other words, not gauging risk with an eye to the general market. If you want a number that reflects the market's risk assessment of an individual issue, use volatility--the annualized standard deviation of a stock's daily change. After all, volatility is used to price risk levels into options and, IMO, more accurately reflects the present perception of a stock's risk than beta.
Best,
--Steve
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