Unlevered beta and Levered beta, which one do we usually know first?
I know that the formula for these two is:
Levered bottom-up beta = Unlevered beta (1+ (1-t) (Debt/Equity))
But which one do we know first and how?
Thanks a lot!
I know that the formula for these two is:
Levered bottom-up beta = Unlevered beta (1+ (1-t) (Debt/Equity))
But which one do we know first and how?
Thanks a lot!
+277 | How to deal with elitism | 95 | 5h | |
+114 | Legal implications of “stealing” a model | 73 | 8h | |
+86 | 8 figure comp in IB/PE compared to Tech? | 40 | 5h | |
+61 | When after you started have you been hit with reality? | 15 | 2h | |
+60 | Am I Cooked for SA 2029? | 15 | 45m | |
+54 | Has anybody quit for mental health reasons and been able to rejoin PE or high finance more broadly? | 10 | 9h | |
+49 | IB/Finance in Denmark? | 24 | 2h | |
+44 | What freshman internship would you choose? | 9 | 2d | |
+44 | HELP. Signed but better opportunity | 41 | 21h | |
+36 | 2024 Global Advisory Long Term Internship- Rothschild (London) | 43 | 23h |
Career Resources
Most financial information services (i.e Yahoo Finance, Bloomberg, etc.) give the levered beta, and if you calculate the correlation between a specific stock and the market (covariance/variance), you’d be finding levered beta.
Most banks use Bloomberg for this or have a model that sources its information from Bloomberg/Thomson/Factset. These give you the levered Beta.
Agree with the above that they're available online.
But to answer your question high level, you would get the unlevered beta first.
You take the betas of the comps, delever and find the average of the comps to come up with your industry beta.
You would then lever the unlevered beta using the company's go-forward capital structure to adjust for the leverage in the specific company.
Thanks a lot! I would appreciate that you could further help on the questions listed below: 1. Is the calculation result through linear regression between market return and stock return a levered beta? 2. In CAPM model, is the beta levered beta?
Dolore iusto a expedita aut. Ab quae autem veniam voluptas sint veritatis nulla.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...