Question

A fund manager of IMD Securities Ltd quoted:
‘GC Tech has a very high beta since its stock has traded as high as $253 and as low as its current $64 during this year.’
Do you agree with the fund manager? Explain.

Answer 1

The Beta of a stock is the stock's volatility in relation to the market.
When a stock has a high beta that implies that the stock swings more than the market.
On the other hand, if a stock has a low beta that implies that the
stock swings less than the market.
A high beta (more than 1) for the GC stock implies that if the market went up
the GC stock went up more than the market. Conversely, when the market went
down the GC stock went more down.
The fund manager is quoted that the stock went up during the year to 253. However,
the GC stock has a high beta if the GC stock swung more than the market in the
period when the GC stock went up.
In addition, the GC stock went to a low of 64 doesn't necessarily mean that the stock
has a high beta. A high beta for the GC stock would imply that the GC stock swung more
than the market during the the time when the GC stock went down.