What does it indicate if a security has a beta greater than 1?

A security with a beta greater than 1 indicates that it is more volatile than the market. Beta is a measure of a security's sensitivity to market movements; a beta of 1 signifies that the security's price will move with the market. If the beta is greater than 1, it means that for every 1% move in the market, the security is expected to move by a greater percentage in the same direction. For instance, a beta of 1.5 would suggest that if the market goes up by 1%, the security is likely to go up by 1.5%, demonstrating greater volatility during market fluctuations.

Higher beta values imply higher risk, but they also suggest the potential for higher returns. Understanding beta is crucial for risk management and portfolio construction, as it helps investors gauge how much risk they are taking relative to the market as a whole.