Find a company that has a beta over 2 Explain why it has a b

Find a company that has a beta over 2. Explain why it has a beta over 2 and what it means.

Solution

India Cements Ltd, has beta of over 2.

Please Google > “Beta - India Cement Limited – reuters”

Beta indicates the measure of systematic risk. Beta is multiplier of market risk premium. Market risk premium = Market return - Risk free return.

Beta of 1 reflects market return, as market is diversified it has beta of 1 that is benchmark. Beta of higher than 1 or say 2 means the security has high beta and that would give a higher return. Higher beta also implies higher risk because any unfavorable deviation in market return would give multiplier effect on market risk premium and that would make returns lower than the expected.