Calculating Betas

14 Pages Posted: 4 Mar 2011 Last revised: 9 Nov 2011

See all articles by Ignacio Velez-Pareja

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Date Written: May 31, 2011

Abstract

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

Keywords: Betas, Beta Calculation, Stock Returns, Market Returns, Systematic Risk

JEL Classification: G10, G11, G12

Suggested Citation

Velez-Pareja, Ignacio, Calculating Betas (May 31, 2011). Available at SSRN: https://ssrn.com/abstract=1773489 or http://dx.doi.org/10.2139/ssrn.1773489

Ignacio Velez-Pareja (Contact Author)

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
Cartagena
Colombia
+573112333074 (Phone)

HOME PAGE: http://cashflow88.com/decisiones/decisiones.html

Register to save articles to
your library

Register

Paper statistics

Downloads
324
Abstract Views
1,564
rank
92,664
PlumX Metrics