Regearing Proxies

This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.

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June 3, 2018 at 9:04 am #455685
mjibola
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Where a proxy company is partly into the new area we’re investing into, do we ungear and regear normally or how do we account for the proportion of the business that’s not into the area we’re venturing into?
June 3, 2018 at 10:07 am #455717
John Moffat
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We ungear the proxy to get the asset beta.

If the proxy is in 2 areas and we only want the beta of the area that we are investing in, then we use the fact that the total asset beta is equal to the weighted average of the individual betas.
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