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In looking through the Financial Glossary I found this definition for beta:

"A measure of the relative volatility of a stock or other security as compared to the volatility of the entire market (usually measured by the S&P 500 index). A beta above 1.0 shows greater volatility than the overall market, and a beta below 1.0 is less volatile."

Unfortunately, the last sentence isn't true. Because beta combines both the relative volatility of a security's returns and the correlation of its returns with the market's returns, beta, by itself, only sets a lower bound on a security's volatility of returns. A security with a beta greater than 1.0 is certainly more volatile than the market (though more information is needed to determine how much more), but a security with a beta less than 1.0 is not necessarily less volatile than the market. For example, stock XYZ could have a standard deviation of returns of 100% compared to the market's 10% (or ten times the market's volatility), but if the correlation of returns of XYZ's stock and the market is 0.05, then XYZ's stock will have a beta of 0.5. That beta describes the relative volatility of returns of an asset is a common misconception.

So, how does one correct the definition in the glossary?
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