What is capital market how does it differ from money market?
The money market is the trade in short-term debt. It is a constant flow of cash between governments, corporations, banks, and financial institutions, borrowing and lending for a term as short as overnight and no longer than a year. The capital market encompasses the trade in both stocks and bonds.
What is alpha and beta in share market?
Alpha shows how well (or badly) a stock has performed in comparison to a benchmark index. Beta indicates how volatile a stock’s price has been in comparison to the market as a whole. A high alpha is always good.
What is the CAPM beta?
Beta, primarily used in the capital asset pricing model (CAPM), is a measure of the volatility–or systematic risk–of a security or portfolio compared to the market as a whole. For beta to be meaningful, the stock should be related to the benchmark that is used in the calculation.
How do you know if a stock is high-beta?
A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock’s beta is less than 1.0. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.
What is the major difference between money markets and capital markets quizlet?
A money market is a component of financial market where short-term borrowing can be issued. This market includes assets that deal with short-term borrowing, lending, buying and selling. A capital market is a component of a financial market that allows long-term trading of debt and equity-backed securities.
What is fund beta?
Beta denotes the sensitivity of the mutual fund towards market movements. It is the measure of the volatility of the mutual fund portfolio to the market. Any beta less than 1 denotes lower volatility and higher than 1 denotes more volatility compared to the benchmark index. …
What is the difference between alpha and beta release?
Alpha software is not thoroughly tested by the developer before it is released to customers. A beta test is carried out following acceptance testing at the supplier’s site (alpha test) and immediately prior to general release of the software as a product.
What is the beta of the market portfolio?
In finance, the beta (β or market beta or beta coefficient) is a measure of how an individual asset moves (on average) when the overall stock market increases or decreases. Thus, beta is a useful measure of the contribution of an individual asset to the risk of the market portfolio when it is added in small quantity.
Do high beta stocks outperform?
High beta stocks are those that are positively correlated with returns of the S&P 500, but at an amplified magnitude. Because of this amplification, these stocks tend to outperform in bull markets, but can greatly underperform in bear markets.