# estimating beta and determining projected beta

Did you learn this section in reading 45 in CFA notes? It is kinda complicated. Do you think we need to nail it?

Sigh yes…I did. If you compare CFA vs Schweser you’ll realise Schweser has skipped it in entirety…not sure if it needs to be nailed though. For what it’s worth, I studied the damn thing in pure shock…

BETA = (covar A,B)/VAR b COVAR = sum (x- x avg)(y - y avg) / [t - 1] var = st dev ^ 2

He’s talking about the pureplay bit daj…it’s defi not the happiest of topics,unlevering, relevering ugh!! Think you’ve got SML on your mind…

I never saw it in tests, but if it ends up in the exam is all fair game. That pure play method is not optional reading.

map1 Wrote: ------------------------------------------------------- > I never saw it in tests, but if it ends up in the > exam is all fair game. That pure play method is > not optional reading. I just saw it once in one test from 7city. However if you have time, it is always good to know.

beta is a good concept and a great question for the CFA exam think about it, they give you a chart with covar and std. deviation and ask you for beta you would have to square the std. deviation then divide COVAR by it. Perfect 2 step exam question.

oh, relelver and unlevering. ya, that will probably be on the test just pick a comp group, unlever it, then relever a beta for the stock you are looking at. Ba = Be/[1+ + (1-t)(d/e)] d/e will be given to you but if not, you can back into it. I fogot the way, but it is not hard.

this makes me a little nervous. Your right that they just completely skipped this LOS (45i. calculate and interpret the beta and cost of capital for a project). is there many other LOSs that schweser has skipped??? Given the rumours of making the exam anti schweser thats one example of being able to do that!

Honestly yes…corp finance should be fun that way. You’ll be surprised to see how much is left out…don’t mean to scare you. Just understand the risk that you’re taking…after that, it’s all you dude.

daj224 Wrote: ------------------------------------------------------- > BETA = (covar A,B)/VAR b > > COVAR = sum (x- x avg)(y - y avg) / > > var = st dev ^ 2 To be honest, i took the exam this june (going for 2 on december) and this is really all they asked for. But really it was just a way to get to the answer quicker. I suggest you know all formulas. As far as beta calculations go, the book tells you that “we will not discuss that in this section” which means that, if u understand the most general of concepts, you should be fine.

It’s worth studying in detail for level 1. I did and found that to be VERY VERY useful when I took Level 2 and in the level 3 material it comes back again. You need this basis anyway so why not make sure you know the ins and outs right now.