Aggressive Beta, Defensive Beta, Then Treynor

Beta is not the standard deviation. It measures how much of the market's movement a share picks up - and it is the denominator of the Treynor ratio. 1. Beta measures a share's risk relative to the market, not its total risk. 2. Beta = 1: the share is expected to move exactly with the market. The market rises 1%, the share rises about 1%. 3. Buy beta-one shares when you want a portfolio that behaves like the index. 4. Beta above 1 is an aggressive share: the market rises 1% and it rises by more - and when the market falls 1% it falls by more. Technology shares sit here. 5. Hold aggressive shares when you expect a rising market. The exaggeration runs in both directions. 6. Beta below 1 is a defensive share: it rises by less than the market and falls by less. Insurers and large property companies are the usual examples. 7. In Israel the bank shares sit near beta 1 on average. 8. The Treynor ratio: return minus the risk-free rate, divided by beta. 9. That is the Sharpe ratio with one substitution - divide by beta instead of by the standard deviation. 10. Sharpe measures excess return per unit of TOTAL risk. Treynor measures excess return per unit of SYSTEMATIC risk. English narration and presentation.