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Raw Beta vs Adjusted Beta
Prakash Kamathia
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While calculating cost of equity via CAPM method, which beta one should use. Raw beta or adjusted beta and why? (...) Read more? Sign up for free
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Raw Beta vs Adjusted Beta
Ramon, Consultant, Spain, Member
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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).
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Raw Beta versus Adjusted Beta
andres elorza, Student (University), Colombia, Member
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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.
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