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Revenge of the Betas: A Bonus Chapter for Insomniacs

In: A Practical Guide to Corporate Finance

Author

Listed:
  • Christophe Thibierge

    (ESCP Europe)

  • Andrew Beresford

    (ESCP Europe)

Abstract

The concept of beta has been used extensively in the last two chapters. We first presented this risk metric in Chapter 5 from a stock market perspective: a stock’s beta is a measure of its volatility. But we very quickly started using it to determine discount rates (expected returns). At the end of Chapter 5, we looked at a company’s financial policy and its impact on the cost of financing. Finally, in Chapter 6 we used beta in the CAPM formula to value Blue Steel Co. To spare the reader’s flagging neurons we did not take it any further at that time. But there is indeed more to say on the matter—and that is what we are going to do in this bonus chapter.

Suggested Citation

  • Christophe Thibierge & Andrew Beresford, 2015. "Revenge of the Betas: A Bonus Chapter for Insomniacs," Palgrave Macmillan Books, in: A Practical Guide to Corporate Finance, chapter 6, pages 195-211, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-49254-8_8
    DOI: 10.1057/9781137492548_8
    as

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