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To: Steve Robinett who wrote (95)	2/3/1999 12:55:00 AM
From: Reginald Middleton	Respond to of 419

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. Volatility IMO, fails to recognize the investors outlook on risk as well. Most investors, especially internet investors, don't mind deviation on the positive side. It is the losses that are percieved as risky. A VAR (value at risk) methodology is much more realistic for investor's perception of risk. The ability to participate in an assets appreciation with a 90% confidence level of a 10% "worst case scenario" loss is much more assuring (realistic) than a volatility of 80%. This is the type of risk management that I have arranged for my site's registered patrons. Most insitutional derivative clients now use VAR and RAROC (risk adjusted return on capital) exclusively. It is now time for someone to turn individuals on to real risk management. I have prepared a paper on this if anyone is interested (still in draft form)

To: Steve Robinett who wrote (95)	2/3/1999 1:15:00 AM
From: Chuzzlewit	Read Replies (2) \| Respond to of 419

Steve, the idea is to generate a risk number relative to the broad-based market. One of the major problems with percent volatility is that it is a very unstable metric, and certainly not constant across the range of options that are traded. You will find that the implied volatility seems to vary amongst the various maturities and whether the option is in or out of the money. The problem with betas is that I am not sure that they really measure risk, and even if they do, they are not stable. Since my methodology depends on long-term growth outlooks, we need a method of estimating the long-term risk. Any suggestions would be greatly appreciated. TTFN, CTC