$NHB.X Beta NYSE

[Nick1984 10]

Just looked at the market internal tools offered by tradestation posted up by James and I saw the symbol $NHB.X which is described as the Beta of the NYSE.

 

Now this is interesting. I'm assuming this indicator measured the market β of the NYSE itself as getting individual β's for different securities would be very difficult and costly.

 

I'm not sure if you're all familiar with this following equation called the Capital Asset Pricing Model or CAPM:

 

CAPM = rf - β (1 - rf) where rf is your risk free rate. Since most people here seem to be day traders or less than 3 month term swing traders I would assume that the 13 week treasury bonds would be your risk free rate.

 

With the answer for CAPM you can discount a security and its future cash flows into the present value, and therefore see whether the observed market value is over or under priced.

 

This is a very valuable bit of information if you're trading a security with known or predictable future cash flows i.e High cap stocks which pay out regular dividends with a relatively constant rate of growth in dividend payments (i know that not every single company pays out dividends on a constant growth rate but close enough is good enough).

 

Question therefore for those who have ever used this indicator: do you know if that indicator actually does give off a reading for the estimated β of the NYSE?