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Financial Management by Sheeba Kapil

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9

Beta: Determination and Implications

“Finance is the only place where one can win the Nobel Prize by linearizing.”

 

Anonymous

LEARNING OBJECTIVES

After reading this chapter, you should be able to:

  1. Understand the concept and rationale for beta estimation.

  2. Learn how to calculate beta using different methods.

  3. Define portfolio and asset beta.

  4. Look at the factors that affect beta estimation.

  5. Understand the limitations of beta estimation.

FINANCE IN PRACTICE

The 2008 financial crisis was followed by the economic slowdown that affected world economies. The U.S. economy too underwent recession. The governments of different countries bailed out ailing banks and other financial institutions. Simultaneously, crude oil prices descended and ...

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