what is the purpose of ungearing the beta? confused.

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    jrow
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    Hi,

    Can anybody explain the difference between the asset and equity betas and why we ungear the equity (???) beta?

    much appreciated.


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    bridmw
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    We ungear the equity beta to see the risk that derives solely from the company’s business risk.

    Asset beta is the ungeared beta.
    Equity beta includes the gearing – it includes the financial and business risk.

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