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Pastimes : Bad investing information/advice on the net contest -- Ignore unavailable to you. Want to Upgrade?

To: Edwarda who wrote (106)	10/7/1999 11:25:00 PM
From: The Other Analyst	Read Replies (1) \| Respond to of 214

OK, let's get back to the purpose of the thread--bad information on the net. Most sites with glossaries define beta and volatility as if they were the same, which they are not. Example, the investorwords.com site. investorwords.com beta A quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market, usually the S&P 500. Specifically, the performance the stock, fund or portfolio has experienced in the last 5 years as the S&P moved 1% up or down. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile. see also alpha, modern portfolio theory. Not quite correct, although close. beta is the correlation between the asset price change and the market price change. the five years part is not part of the definition. The reference to 1% is also not correct. and here is the definition of volatility from the same site. volatility The relative rate at which the price of a security moves up and down; found by calculating the annualized standard deviation of daily change in price. Volatility is the annualized standard deviation of daily price changes, so that part is correct. But there is nothing "relative". The relative part is where beta comes in.

To: Edwarda who wrote (106)	10/7/1999 11:39:00 PM
From: The Other Analyst	Read Replies (1) \| Respond to 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.