Analyst's Toolkit: Beta and Bank of America

Analyst's Toolkit is a weekly feature that assesses stocks, bonds and funds by using measures that can give different perspectives on valuation. Come back every Wednesday for fresh insights into analyzing securities.

As we now know, banks were the incubator for the economic collapse. By looking at a measure called beta, investors could have detected increasing risk in bank stocks well before financial Armageddon.

Bank of America(BAC Quote), Citigroup(C Quote) and Wells Fargo(WFC Quote) shareholders suffered through a tumultuous year. It didn't have to be that way. Risk-averse investors could have sold off their holdings before most of the losses by paying attention to the beta value of the companies' stocks.

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