Several methods are used to measure equity risk, including:
- Volatility: This measures the degree of variation in the price of a security over time. Higher volatility indicates higher risk. - Beta: This metric compares the volatility of a stock to the market as a whole. A beta greater than 1 indicates higher risk, while a beta less than 1 indicates lower risk. - Value at Risk (VaR): VaR estimates the potential loss in value of an asset or portfolio over a defined period for a given confidence interval.