The Elasticity of the Price of a Stock and its Beta
Beta, CAPM, characteristic line, price index, risk, least squares, elasticity
Systematic risk in an investment in a security is measured by the security’s beta. The beta of a stock is considered as a very important parameter in asset pricing. It is used to estimate the expected return of a stock with respect to its market return. Beta is estimated by the regression method. In this paper, we consider some problems associated with the concept of beta and its estimation. We also advocate for the use of elasticity as an alternative to beta.