What does a beta greater than one signify about a company's stock?

A beta greater than one signifies that a company's stock is more volatile than the market. Beta is a measure of a stock's sensitivity to market movements. Specifically, a beta of 1 indicates that the stock moves in line with the market. Therefore, if a stock has a beta greater than one, it suggests that, on average, the stock tends to experience larger price swings compared to the overall market. This means that in a rising market, the stock may increase significantly, while in a declining market, it could fall more sharply. Investors interpret a higher beta as indicative of higher risk, and consequently, potentially higher returns.

A beta less than one, on the other hand, would indicate that the stock is less volatile than the market, while a zero beta would reflect no correlation with market movements. Understanding beta is crucial for investors when assessing risk and constructing portfolios based on their individual risk tolerance.