Think of Beta as a Risk Multiplier 📈

Added: 2026-05-23

[00:00:00]Think of beta as a risk multiplier. It scales the equity risk premium based on how risky this company feels compared to the market. For example, if you're talking about a software company, a technology company, these type of companies usually have a higher beta.

[00:00:12]Why? Because these companies [music] are more riskier than the generalized broad-based market. Compare this to a utilities company providing you electricity, those kind of companies have lower beta compared to the broad-based market. So, this is how beta goes from one industry to the other.