Can Beta of a Stock be 0? And can Beta be Negative?

Capital Asset Pricing Model
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Melvin, USA

Can Beta of a Stock be 0? And can Beta be Negative?

Question on CAPM: I know that in the CAPM Model the Beta for a stock can be less than one. If the company has a Beta of 0.33, then it is supposed to be 3 times less risky than the overall market. But can Beta also be zero? And can it be negative?


Pereira, Portugal

Can Beta be zero ?

Assuming a Beta=0 is the same as to say that the r=Rf. Then, the security under valuation has the same expected earnings as a risk free asset. Finally, the only asset with a risk free rate is assumed to be government bonds.
So, saying that some asset has Beta=0 is equivalent to say that asset is risk free or is a government bond

CSB Nair, India

Stock Beta =<0

The beta can well be 0 or negative if the expected earnngs are below the risk free rate.

Thomas, USA

Stocks with a negative

A company with a of 1.000 has the same expected return rate as the risk free rate.
I therefore believe that CSB Nair is incorrect: if the expected earnings are just lower than the risk free rate, then the company has a between 0 and 1, but not negative.
Yet it is possible to imagine a company with a negative beta! This is (only) the case when its returns are counter-cyclical and move opposite to the market.
Of course, the beta of most companies' stock is positive. But there are financial assets which are designed to have negative betas. For example, funds that engage exclusively in short-selling make money when the market is falling and lose when the market is rising. Including these assets in your portfolio decreases your volatility.

Harold, Canada

Beta of a stock

A beta of one means the stock moves with the market: in other words when the market moves up ... Sign up

Walter, UK


Gold-related stocks are typically beta-negative.... Sign up

Bikash, India

What about cash??

Assets with beta 0 are same as risk-free assets and have same expected return and not assets with be... Sign up

Liaqat Ali, Pakistan


It is the theory that relates the expected return with the risk, so when we say that the beta is zer... Sign up

Anna, UK


Risk-free security does not necessarily mean zero return-the return will be equal to the interest ra... Sign up

Manager, India

Gold Industry may have a Negative Beta

If beta < 0 then the investment's returns will move, on average, in the opposite direction to the ma... Sign up

Mukela Namushi Mubano
Accountant, Zambia

Inflation in CAPM

I totally agree with @Anna. Inflation effects seem to be ignored when we are dealing with risk-free ... Sign up

nitish dwivedi
Student (Other)

Beta Can Be Negative: Gun Companies

Friends, at the time of war when all companies profits are falling, gun companies actually are makin... Sign up

SCOTT DIAMOND, United States

Beta Does Not Imply No Risk!

While I would agree that safe investments have a low beta, this does not mean that if the beta is lo... Sign up

Warren D. Miller, CPA, CFA
Strategy Consultant, United States

Beta = 0? No Way!

Under no conditions would the beta of any for-profit enterprise = 0. As others have pointed out, tha... Sign up


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