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Hello,
I have been watching you lectures regarding CAPM and CAPM and MM combined. However I would like to better understand which Beta is the one we use to calculate the cost of equity with CAPM. Is this beta an asset beta? I am assuming this because the only risk taken into account is the systematic risk, which is a business risk (no financial risk taken into account).
However if I am looking for published beta, to ungear and gear, then I would find the equity beta … bit confusing to me. Could you please clear this up for me?Thank you
Br
S.The cost of equity is always determined by the equity beta.
(The equity beta takes account of the business and the financial risk, and the cost of equity is affected by both the business risk and the level of gearing. The asset beta measures the risk of the business ignoring any gearing.)
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