Betas measure the volatility of a stock in relation to the broader market stock over time. Investors calculate beta through comparison of stock price change movements of a benchmark index. There are numerous choices with each input hence the variance in beta values for the same company. Below are betas for Apple Stock as reported by various companies listed each with a different beta tool.
Yahoo Finance- 1.29
Google- 0.99
CNN Money-
Value Line- 0.52
Different companies report different betas due to varying benchmarks to represent the market against which the company is being compared. For example, Yahoo finance uses S&P 500 to calculate its beta. While other companies use tools such as the New Stock Exchange Composite Index and the MSCI EAFE. For each case, the companies' values are different based on the different tools mentioned above (Levendis & Dicle, 2017). That is why the value reported by Yahoo is high as compared to Google and Value Line. The impression of the relative volatility is shocking as it greatly values among the compared companies.
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Regardless of why the values differ across companies, the key point is that one cannot accurately compare the beta values of different companies if different companies are used. Therefore, if one compares companies' market volatility, they must use the same source for each company to get accurate and real-time comparison.
In conclusion, betas are used to determine the market volatility of prices. As illustrated, different companies reported different betas due to the tools they use. The most accurate means of comparison across companies is to use the same company to compare betas.
Reference
Levendis, J., & Dicle, M. F. (2017). Calculating a Portfolio's Beta. Journal of Economics and Finance Education, Forthcoming .
