Definition of "Beta Coefficient"

A relative measure of risk, or price volatility, related to a market benchmark (e.g., S&P 500 average). A beta of 1.0 means that for every 1% change in the market, an individual security or investment will likely move 1%. The higher the beta, the greater the risk than that of the market benchmark. A beta, for example, of 1.5 indicates that an investment's returns will likely be 1.5 times as volatile as the general market's returns. A beta of .92, on the other hand, means that an investment would be expected to drop 8% less than that of the benchmark and rise 8% less than the benchmark. A negative beta indicates that an investment is likely to move in the opposite direction of the benchmark.