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what is the purpose of ungearing the beta? confused.

Forums › ACCA Forums › ACCA FM Financial Management Forums › what is the purpose of ungearing the beta? confused.

  • This topic has 1 reply, 2 voices, and was last updated 14 years ago by bridmw.
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  • November 14, 2010 at 5:30 pm #45971
    jrow
    Member
    • Topics: 27
    • Replies: 15
    • ☆

    Hi,

    Can anybody explain the difference between the asset and equity betas and why we ungear the equity (???) beta?

    much appreciated.

    November 14, 2010 at 10:16 pm #70560
    bridmw
    Member
    • Topics: 5
    • Replies: 132
    • ☆☆

    We ungear the equity beta to see the risk that derives solely from the company’s business risk.

    Asset beta is the ungeared beta.
    Equity beta includes the gearing – it includes the financial and business risk.

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