X
Welcome to the world's #1 website about management.
Why register?
 Discover 1000s of knowledge centers.
 Learn from colleagues and experts.
 By signing up you get full access to all knowledge centers and discussion forums, including Capital Asset Pricing Model.
Log in

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




Can Beta be zero ?
Pereira 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... 



Stock Beta =<0
CSB Nair The beta can well be 0 or negative if the expected earnngs are below the risk free rate.... 



Stocks with a negative ß
Thomas A company with a ß of 1.000 has the same expected return rate as the risk free rate.
I therefore believe that CSB Nair is incorrect: if the expec... 



Beta of a stock
Harold A beta of one means the stock moves with the market: in other words when the market moves up 5% the stock moves up 5%.
A stock with a b... 



Gold
Walter Goldrelated stocks are typically betanegative.... 



What about cash??
Bikash Assets with beta 0 are same as riskfree assets and have same expected return and not assets with beta 1 as Thomas believes.
Can assets have negative... 



CAPM
Liaqat Ali It is the theory that relates the expected return with the risk, so when we say that the beta is zero then it means that the security is risk free and... 



CAPM
Anna Riskfree security does not necessarily mean zero returnthe return will be equal to the interest ratei.e. Government bonds with 5% returnthey are c... 



Gold Industry may have a Negative Beta
Ghanshyam, Manager, India, Member If beta < 0 then the investment's returns will move, on average, in the opposite direction to the market's returns, to a lesser extent if beta > 1, t... 



Inflation in CAPM
Mukela Namushi Mubano, Accountant, Zambia, Member I totally agree with @ Anna. Inflation effects seem to be ignored when we are dealing with riskfree securities. All s... 



Beta Can Be Negative: Gun Companies
nitish dwivedi, Student (Other), Member Friends, at the time of war when all companies profits are falling, gun companies actually are making more profits by selling more. And when the war i... 



Beta Does Not Imply No Risk!
SCOTT DIAMOND, Manager, United States, Member While I would agree that safe investments have a low beta, this does not mean that if the beta is low the investment is safe. I follow stock of startu... 





Special Interest Group Leader



Capital Asset Pricing Model






