Raw Beta vs Adjusted Beta

Capital Asset Pricing Model
Knowledge Center
      
			              Forum
			            
							              10

		            		Prakash Kamathia, India
			            
Raw Beta vs Adjusted Beta

	          		While calculating cost of equity via CAPM method, which beta one should use. Raw beta or adjusted beta and why?
				      
X

							  			Welcome to the Capital Asset Pricing Model forum. The topic being discussed here is: "Raw Beta vs Adjusted Beta". 
										
Please sign up now to read all responses and to join this discussion yourself.  It's free. 

										Log in
About 12manage | Opinions

Comments

																	  	Sort by date
																	  	Sort by rating
																		
Rating

										              4

						            	Ramon
Consultant, Spain
												
				                Raw Beta vs Adjusted Beta

													In my modest opinion, it is better to adjust the raw beta that arises from the division of the asset return covariance with market by the market return variance. Frequent adjustments are:

(1) towards beta=1, and 

(2) to take into account the effect of the leverage of the company (relevered beta).
				                
										              0

						            	andres elorza
Student (University), Colombia
												
				                Raw Beta versus Adjusted Beta

													The cost of equity calculated with the raw beta will give you a cost of equity without the risk of the debt, in other words, it will give you the cost of equity of a unleveraged firm.
				                
Leave a comment

			                            More on Capital Asset Pricing Model:
			                          
													            	Summary
													            
												              Discuss
												            
		                          	Can Beta of a Stock be 0? And can Beta be Negative?
Application of Capital Asset Pricing Model in Pakistan
👀Raw Beta vs Adjusted Beta
🔥How to Use CAPM for Project Analysis?
Calculating Beta of Portfolio after Portfolio Change
Question - CAPM and Beta
CAPM is Irrelevant to Use
CAPM usage by Fund Managers
Why Sharp Increase in the Calculation for Betas
Are US Treasury Bills still Zero Beta?
Calculating Company Beta
CAPM Model and Calculating the Inflation Rate?
Concept of Marginality and CAPM
What is Beta? Explanation and a Few Remarks

		                              Special Interest Group
		                            
		                            Do you have a keen interest in Capital Asset Pricing Model? Become our SIG Leader
Capital Asset Pricing Model
Knowledge Center