How does one know when it is required to adjust Beta while calculating required return estimates?
I am not there yet, still working on FSA.
Isn’t adjusting Beta a method of preference? Every time I’ve seen adjusted beta, the question has always said that such and such person adjusts beta based on the following adjusted beta formula (and they give you the beta adjustment formula). Also, we always see the same beta adjustement formula, but I don’t think this is a set formula (i.e… the 0.333 and 2/3 factor adjustment, or whatever they are called), so unless they tell you to adjust beta and give you the adjustment formula and factors, I think it’s safe to assume that we don’t adjust beta.
What cleverCFA said plus when the vignette suggests that there might have been a bias in the betas in the past.