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Sir, I was wondering if just like we can break down the Asset Beta of a company to extract the asset betas of the component businesses of the company, or we can use the equity beta of two companies to find a combined Asset beta, can we do that for Equity betas too? Or do they work differently??
Case in point being Tisa Co (6/12) I tried to find the equity beta of the electronic parts division and then ungearing it (like how we ungear the provided equity beta of other activities division using only the proportions of equity and debt used by it) but I couldn’t get the answer right.
The asset beta when combining two parts will always be the weighted average of the individual asset betas.
However, this will only be the same for the equity betas if the gearing of the two parts is the same. If not (and it is usually not!) then you have to get the asset betas and combine them, and only then get the equity beta.
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