What is a measure of a stock's sensitivity to changes in the market known as?

The measure of a stock's sensitivity to changes in the market is known as the stock's beta. Beta quantifies the relationship between the stock's price movements and the overall market movements. A beta of 1 indicates that the stock’s price tends to move with the market; a beta greater than 1 signifies higher volatility, meaning the stock is expected to be more sensitive to market movements, while a beta less than 1 indicates lower volatility and sensitivity.

Understanding beta is crucial for investors, as it helps assess the risk level of a stock in relation to the overall market. This measure is particularly useful for portfolio management, as it can inform investment decisions aligned with individual risk tolerance and market outlook. In contrast, alpha pertains to a stock's performance relative to a market benchmark, market capitalization refers to the total value of a company's outstanding shares, and the risk premium is the expected return above the risk-free rate that investors require for taking additional risk. Thus, stock beta is specifically associated with market sensitivity and risk assessment.