Leveraged beta
The beta of a leveraged required return; that is, the beta as adjusted for the degree of leverage in the firm's capital structure. |
Similar financial terms
Unleveraged required returnThe required return on an investment when the investment is financed entirely by equity (i.e. no debt).
Unleveraged beta
The beta of an unleveraged required return (i.e. no debt) on an investment when the investment is financed entirely by equity.
Leveraged required return
The required return on an investment when the investment is financed partially by debt.
Leveraged portfolio
A portfolio that includes risky assets purchased with funds borrowed.
Leveraged lease
A lease arrangement under which the lessor borrows a large proportion of the funds needed to purchase the asset and grants the lender a lien on the assets and a pledge of the lease payments to secure the borrowing.
Leveraged equity
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the benefits and costs of using debt.
Leveraged buyout (LBO)
A transaction used for taking a public corporation private financed through the use of debt funds: bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund ...
Beta
The beta (β) is a statistical measure of market risk on a portfolio. The beta has traditionally been used to estimate the elasticity of a stock portfolio's return relative to the market index. A beta of 0.7 means the total return of the security is likely to move up or down 70% of the market change; 1.3 means total return is likely to move up or down 30% more than the market. Beta is referred to as an index of the systematic risk due to general market conditions that cannot be diversified ...
Zero-beta portfolio
A zero-beta portfolio is constructed to have zero systematic risk, similar to the risk-free asset, that is, having a beta of zero. (i.e. in most cases, we assume the beta of debt to be zero).
Beta equation
The beta of a security is determined as follows:
[(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]
where: n = # of observations (36 months)
x = rate of return for a benchmark index
y = rate of return for the security
Country beta
Covariance of a national economy's rate of return and the rate of return the world economy divided by the variance of the world economy.
