Question

For example, Texaco has a beta coefficient of 0.44, which means that when the overall market rate of return changes by 1%, Texaco's rate of return changes only 0.44%. So Texaco doesn't move much at all relative to the overall market. An investor with a low tolerance for risk would be attracted to Texaco because its beta coefficient is less than 1. What does r2 mean

Answer 1

r^2 is a measure of the proportion of the total risk related to the activities and decisions of the company compared to the benchmark market

Step-by-step explanation:

Beta coefficient is used to guage the rate of returns of shares and also determines the risk appetite of investors.

High risk investors prefer a beta of >1. Rate of return is more sensitive in the benchmark market than the average stock.

When the beta coefficient is 1 there is perfect up and down movement with the benchmark market.

When beta is less than 1 it is less sensitive in the benchmark market than average stock. This is preferred by investors with low risk

r^2 is a proportional measure of total risk of a particular share related to the benchmark market