May 31, 2011
This teaching note shows the relationship between levered and unlevered betas and the general formulation for the cost of equity. It also shows, step by step, the procedure to estimate betas from data found in the stock market.
It shows well known procedures for estimating betas: correlation coefficient and standard deviations of the stock and the market, covariance between stock and market and market variance and ordinary least squares (numerical and graphical).
This written material is useful for practitioners, teachers and students of Corporate Finance.
There is a Spanish version of this paper at http://papers.ssrn.com/abstract=1773771
Number of Pages in PDF File: 14
Keywords: Betas, Beta Calculation, Stock Returns, Market Returns, Systematic Risk
JEL Classification: G10, G11, G12working papers series
Date posted: March 4, 2011 ; Last revised: November 9, 2011
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