Beta Risk

Dictionary Says

Definition of 'Beta Risk'

The probability that a false null hypothesis will be accepted by a statistical test. This is also known as a Type II error. The primary determinant of the amount of beta risk is the sample size used for the test. The larger the sample tested, the lower the beta risk becomes.
Investopedia Says

Investopedia explains 'Beta Risk'

An interesting application of hypothesis testing in finance can be done using the Altman Z-score. The Z-score is a statistical model meant to predict the future bankruptcy of firms based on certain financial indicators. Statistical tests of the accuracy of the Z-Score have indicated relatively high accuracy, predicting bankruptcy within one year. These tests showed a beta risk (firms predicted to go bankrupt but did not) ranging from approximately 15 to 20%, depending on the sample being tested.

Articles Of Interest

  1. Beta: Gauging Price Fluctuations

    Learn how to properly use this measure that can help you meet your criteria for risk.
  2. Beta: Know The Risk

    Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here.
  3. Trading The Odds With Arbitrage

    Profiting from arbitrage is not only for market makers - retail traders can find opportunity in risk arbitrage.
  4. Backtesting: Interpreting The Past

    We offer some tips on this process that can help refine your current trading strategies.
  5. Using Logic To Examine Risk

    Know your odds before you put your money on the table.
  6. Investing Books It Pays To Read

    We provide some classic and lesser-known titles to add to your collection.
  7. Handicap The Market, Rack Up Gains

    Investing on Wall Street and gambling on The Strip are not as different as they may seem.
  8. Regression Basics For Business Analysis

    This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how.
  9. Breaking Down The Geometric Mean

    Understanding portfolio performance, whether for a self-managed, discretionary portfolio or a non-discretionary portfolio, is vital to determining whether the portfolio strategy is working or ...
  10. Tracking Volatility: How The VIX Is Calculated

    When market volatility spikes or stalls, newspapers, websites, bloggers and television commentators all refer to the VIX®. Formally known as the CBOE Volatility Index, the VIX is a benchmark ...
comments powered by Disqus
Marketplace
Hot Definitions
  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center