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Unit 6 Discussion Is Positive Beta Better than Negative Beta? A Beta factor represents risk in...

Unit 6 Discussion

Is Positive Beta Better than Negative Beta?

A Beta factor represents risk in a financial instrument or commodity. Explain the reasons for changes in beta and explain if one should be more concerned with a negative versus positive factor. Be sure to reference volatility. Please provide an example of negative Beta.

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Answer #1

Most of the time positive beta is better than negative beta because most of the financial instruments or commodity prices increases in most of the time and it is sync with stock indices.

Yes a beta is a repreentation of risk of it mainly tells how financial instrument or commodity will vary with respect to benchmark indices. Positive beta of higher value will move faster when there is increase in benchmark indices and vice versa.

Beta changes due to change in the perfomance of stock or other stock related issues like performance of stock is becomes more positive or negative due to some changes in its variables. It mainly changes the volatiltiy of the financial instrument and commodity.

Gold is an example of negative beta because it is one of the contarian bet when inflation is high and market is giving negative return.

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