what is the purpose of ungearing the beta? confused.

Jjrow15y ago

Hi,

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

much appreciated.

Bbridmw15y ago#1

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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