What is 'Beta' in CAPM?

What is 'Beta' in CAPM?

Approach: Define the measure of systematic risk.

A measure of the volatility, or systematic risk, of an individual stock in comparison to the entire market. Beta = Cov(Ri, Rm) / Var(Rm).

Follow-up: What does a Beta of 1.5 imply?

Key concepts: market risk, volatility, correlation.