Equity beta

Beta is based on how returns co-vary with market returns, rather than on total volatility alone. Equity beta incorporates the effect of a company's borrowing on the residual return to shareholders. A beta above one indicates greater systematic sensitivity than the market; it does not mean the share must rise or fall by a fixed multiple on every occasion. Statistical estimates use historical data and may not represent future conditions. For a project in a different business, an appropriate comparable-company beta may need to be ungeared and then regeared.