Beta

What is Beta?

Beta is the coefficient or slope of the linear regression of a risky asset's excess returns $(R_i-R_f)$ on the market portfolio's excess returns $(R_M-R_f)$:

$$(R_i-R_f)=\alpha+\beta*(R_M-R_f),\; where \;R_f\; is\; the\; risk-free\; rate.$$

A graph demonstrating an example of beta.