Roth- Case Paper

988 Words4 Pages
FINANCE 301
DR. SHELDON NOVACK
CASE STUDY

ROTH FINANCIAL ADVISORS PART #1 INTRODUCTION Roth Financial, founded nearly 10 years ago, is a financial services firm which has a diverse base of clients. The founder of this start-up firm, Hugo Roth, developed a reputation for himself and also his associates by the way the financial firm conducts business. As the firm grew, so did the firm’s reputation for honesty and fair dealing. Hugo Roth established a reputation for training and helping his new associates establish themselves in the financial industry. Steve Johnson was a financial advisor in training for Roth Financial Advisors and was willing to take extra measures in order to learn more about financial services. His most
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Beta is used in the capital asset pricing model (CAPM) which is a model that calculates the expected return of an asset based on its beta and expected market returns. Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market and beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. Stock A has a beta of 1.315, so theoretically stock A is 31.5% more volatile than the market. Stock B has a beta of -.557 which means the stocks are a commodity.

Beta is more useful when analyzing stocks that are to be placed in a portfolio. Beta is more useful because beta will calculate if a stock is a commodity, a defensive stock, or if the stock will move with the economy. If the beta is over 1.5 the stock is a high risk stock. From completing a simple beta equation a person can diversify their portfolio to include a mixture of commodities, stocks which move with the economy, and defensive stocks. So in case of hard economic times a person with a diversified portfolio will not lose all their investments because the economy tanked but instead have some stocks which will strive during a recession while other stocks are losing money. The main difference between beta and
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