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What Kind Of Share Price Volatility Should You Expect For Marcus & Millichap, Inc. (NYSE:MMI)?

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If you own shares in Marcus & Millichap, Inc. (NYSE:MMI) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. The second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.

Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is one. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

View our latest analysis for Marcus & Millichap

What we can learn from MMI's beta value

Given that it has a beta of 1.25, we can surmise that the Marcus & Millichap share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Marcus & Millichap shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Beta is worth considering, but it's also important to consider whether Marcus & Millichap is growing earnings and revenue. You can take a look for yourself, below.

NYSE:MMI Income Statement, April 18th 2019
NYSE:MMI Income Statement, April 18th 2019

Does MMI's size influence the expected beta?

Marcus & Millichap is a small cap stock with a market capitalisation of US$1.6b. Most companies this size are actively traded. It's not particularly surprising that it has a higher beta than the overall market. That's because it takes less money to influence the share price of a smaller company, than a bigger company.

What this means for you:

Since Marcus & Millichap tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. This article aims to educate investors about beta values, but it's well worth looking at important company-specific fundamentals such as Marcus & Millichap’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for MMI’s future growth? Take a look at our free research report of analyst consensus for MMI’s outlook.

  2. Past Track Record: Has MMI been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of MMI's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how MMI measures up against other companies on valuation. You could start with this free list of prospective options.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.