Stock Volatility and Beta Coefficient: BIST 30 Index

Beta coefficient

The beta coefficient indicates the risk according to the stock market index. In other words, it is the numerical expression of the market risk of the stock.

The beta of the stock represents the index’s volatility.

Beta Coefficient Signals

The beta coefficient: \(\beta\)

\(\beta\)=1, the stock movement is the same as the index (average risk)

\(\beta\)<1, the stock movement is slower than the index (less risk, lower volatility)

\(\beta\)>1, the stock movement is faster than the index (more risk, higher volatility)

It is expected that stocks with a beta coefficient 1 will appreciate as much as the increase rate of the index. In the opposite case, it is expected to decrease. In the case of stocks with a beta coefficient of 1 or below, it is expected that the stock will be valued by multiplying the increase rate of the index and the beta coefficient. For example, if the beta coefficient is increased by 0.8 and the index is increased by 5%, the stock (0.8 x 5% =) increase of 4% is expected.

For risk-averse investors, the beta coefficient of 0.7-1 is considered suitable for the ideal portfolio, while it varies according to the investment risk.

The Relationship Between Beta Coefficient and Volatility

The Beta coefficient suggests the relationship between the change in the price of the stock (volatility) and the market. For this reason, there is a high level of correlation between equity volatility and beta coefficient.

Thus, if the beta coefficient is greater than 1, the price of the stock is actually increasingly volatile. Therefore, the wider the range of a stock’s price, the more volatile it is.

There is a direct and proportional interaction between the beta coefficient and volatility. The volatility of the stock is affected when the beta coefficient is high. The low beta coefficient has a negative effect on the volatility of the stock.

BIST 30 Index and Beta Coefficients

The beta coefficients of BIST 30 companies in the banking sector are as follows:

Bist 30 banking beta as of July 2018

The beta coefficients of BIST 30 companies that are traded in the conglomerate and investment partnership sector are as follows:

Bist 30 conglomerate beta as of July 2018

The beta coefficients of BIST 30 companies that are traded in the manufacturing industry are as follows:

Bist 30 manufacturing beta as of July 2018

The beta coefficients of BIST 30 mining companies are as follows:

Bist 30 mining beta as of July 2018

The beta coefficients of BIST 30 companies that are traded in the technology/defense sector are as follows:

Bist 30 defense beta as of July 2018

The beta coefficients of the companies traded in the retail sector on BIST 30 are as follows:

Bist 30 retail beta as of July 2018

The beta coefficients of the companies that are traded in the field of communication in BIST 30 are as follows:

Bist 30 communication beta as of July 2018

The beta coefficients of BIST 30 companies that are traded in the airline sector are as follows:

Bist 30 airline beta as of July 2018

Conclusion

Bist 30 index and its beta as of July 2018
Source: tradingview.com

Airline industry beta coefficient is higher than in other sectors. The volatility of these stocks in the airline industry seems to be high according to the index. Also, the volatility of the banking sector is according to the index. Those who invest in these sectors have high risks as well as high expected returns.

The sector with lower volatility than other sectors is the retail. According to the indices of these sectors, the expected yield is lower.

Disclosure: I do not have any of the securities mentioned above. This article expresses my own views, and I wrote the article by myself. I am not receiving compensation for it. I have no business relationship with any company whose security is mentioned in this article.

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Important Information

The investment information, comments and recommendations contained herein are not subject to investment advice. The comments and recommendations contained herein are based on personal views. These views may not fit your financial situation and your risk and return preferences. For this reason, based only on the information contained herein, investment decisions may not have the appropriate outcome.