Unleveraged beta
The beta of an unleveraged required return (i.e. no debt) on an investment when the investment is financed entirely by equity. |
Similar financial terms
Unleveraged required returnThe required return on an investment when the investment is financed entirely by equity (i.e. no debt).
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).
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.
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.
