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Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › beta

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.
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  • September 26, 2014 at 11:11 am #196500
    student07
    Member
    • Topics: 193
    • Replies: 162
    • ☆☆☆

    Could you please explain me is the dquity beta and asset beta same.

    September 26, 2014 at 2:07 pm #196511
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    No they are not the same.

    The equity beta measure the risk of a share. Shares are risky partly because of the nature of the business, and partly because of the level of gearing.

    The asset beta measures the risk of the business (ignoring gearing).

    The equity beta and the asset beta will only have the same value if there is no gearing in the business, otherwise the equity beta will be higher.

    That is why there is a formula on the formula sheet enabling us to calculate one from the other.

    You really should watch the free lectures on Capital Asset Pricing Model.

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