Question
In: Finance
Before you conduct equity valuation you want to make an adjustment to the regression calculated beta to make it more forward-facing.
Before you conduct equity valuation you want to make an adjustment to the regression calculated beta to make it more forward-facing. Your calculated beta is 1.45. What is yqur adjusted beta? State your answer with two decimal places.
Solutions
Expert Solution
A beta has a habbit of moving towards it's mean reverting level that is 1. Hence, we adjust the beta before making any predictions.
Adjusted beta = 2/3 x raw data + 1/3 x 1
Adjusted beta = 2/3 x1.45 + 1/3 x1
Adjusted beta = 0.966666 + 0.33 = 1.2966666 = 1.30
Answer = 1.30
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jeff jeffy answered 2 years agoRelated Solutions
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