321Class13-Beta - Measuring Market Risk: = Beta The...

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Measuring Market Risk: β Β = Beta The correlation of a single stock relative to rest of stock market Beta also reflects a single stock SD m i i , ρ β= m m i i 2 , σ β⇒
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Estimating beta Measurement of Diversifiable risk Regression of stock returns against the “Market” r m r f = US T-bill (1-yr, 5-yr…), LIBOR….
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Why No Beta or Uncertain Beta New businesses Project beta Small firms without equity trades Not publicly traded company Variations in beta measurements
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Asset β Also called “cash-flow beta” or “asset beta” CF = NI – FC – VC PVasset = PVrevenue – PVfc – PVvc
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This note was uploaded on 10/28/2011 for the course FIN 321 taught by Professor Smith during the Fall '08 term at University of Illinois at Urbana–Champaign.

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321Class13-Beta - Measuring Market Risk: = Beta The...

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