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20 June, 08:26

For example, Texaco has a beta coefficient of 0.44, which means that when the overall market rate of return changes by 1%, Texaco's rate of return changes only 0.44%. So Texaco doesn't move much at all relative to the overall market. An investor with a low tolerance for risk would be attracted to Texaco because its beta coefficient is less than 1. What does r2 mean

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  1. 20 June, 11:07
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    r^2 is a measure of the proportion of the total risk related to the activities and decisions of the company compared to the benchmark market

    Explanation:

    Beta coefficient is used to guage the rate of returns of shares and also determines the risk appetite of investors.

    High risk investors prefer a beta of >1. Rate of return is more sensitive in the benchmark market than the average stock.

    When the beta coefficient is 1 there is perfect up and down movement with the benchmark market.

    When beta is less than 1 it is less sensitive in the benchmark market than average stock. This is preferred by investors with low risk

    r^2 is a proportional measure of total risk of a particular share related to the benchmark market
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Home » Business » For example, Texaco has a beta coefficient of 0.44, which means that when the overall market rate of return changes by 1%, Texaco's rate of return changes only 0.44%. So Texaco doesn't move much at all relative to the overall market.
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