Stock Beta Definition & Application Wiki

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Stock Beta Data

Short Definition

The regression of stock market returns versus the return of the market (also called the market beta). Beta should be forward looking for valuation purposes, because an investment's value is the discounted future cash flow.

  • Unlevered Beta: is the beta of the target company minus the affects of debt leverage.
    • Equation: Beta (market) equals beta (observed in the stock market) divided by [1 + (debt/equity) times (1 minus taxes)]
  • Relevered Beta: is the beta of the target company plus the affects of debt leverage.
    • Beta (unlevered) equals beta (observed in the stock market) times [1 + (debt/equity) times (1 minus taxes)]

Long Definition

See Dictionary Terms

See Academic Resources

Source: http://en.wikipedia.org/wiki/Beta_coefficient

Page tags: unlevered