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Why does Warren Buffett look down on beta as a measure of risk?

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Why does Warren Buffett look down on beta as a measure of risk?


Almost every analyst on wall street uses beta when calculating the intrinsic value of a firm.


It is important to note that beta has many negatives as a measure of risk...


1. What historical time period should an analyst use to capture beta? If it's five years then analysts might expose themselves to one time events such as covid to measure future volatility which is almost certainly not going to repeat itself.


2. Historical betas will always be a poor measure of risk for the future.


3. Volatility of a stock price is different from the risk of the underlying business.


In addition to these, there are many more reasons to avoid using beta as a measure of risk.


 

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