Beta is inherently less constant than total beta

The least areas line gives a slope which is precisely total beta.  Ordinary beta, however, mixes together the relative volatility AND the correlation of your investment compared to the market.  So, if you rank assets by total and then by ordinary beta, you'll get a different order.  Volatility will appear higher or lower depending on the beta formula used.  Academic research (Francis, 1979) has indicated that the least stable part of beta comes from the relative volatility measures, so, by definition, total beta will be a more stable indication of risk.

To give you an indication of how inconstant beta can be, other researchers (Acker and Duck 2007 Journal of Accounting, Auditing and Finance Issue 22 for one early example), found that the beta on one stock calculated over five year returns ranged from plus 2 to minus 2 based on the trading day within the month chosen.  “Beta is not a robust statistic, and yet minor changes in it’s estimation have a big effect” on valuation, Professor Christopher Tofallis argued at the ASA Advanced Business Valuation Conference this morning.  “Some experts say we have to use beta because it’s the best tool available,” he says.   “I hope to find more stable indicators.”