What does beta indicate in relation to a stock?

Beta is a measure that indicates how a stock tends to move in relation to the overall market. A beta greater than 1 suggests that the stock is more volatile than the market, meaning it often experiences larger price swings in both upward and downward directions. Conversely, a beta less than 1 indicates that the stock is generally less volatile than the market. This relationship helps investors assess the risk associated with a specific stock compared to the broader market.

In contrast, the other options address different aspects related to stocks. Dividend yield relates to the income produced by holding a stock. The company's growth potential focuses on the prospects for future earnings and expansion rather than price volatility. Liquidity refers to how easily a stock can be bought or sold without significantly affecting its price. Thus, while these factors are important for investment decisions, they do not pertain directly to the concept of beta and its role in indicating risk relative to market movements.