Prior to beginning work on this discussion forum, read and , Section 5c of the text, and watch . Finally, review . Beta is a measure of a stocks volatility as compared to the overall equity market. Many investors use beta as a quick estimate of a stocks risk. In this discussion forum, you will evaluate whether beta is a reliable estimate of risk for purposes of calculating a companys cost of equity.
In your post (with a minimum of 300 words):
- Choose a single industry and then three publicly traded companies from within that industry. For suggestions, review the list of .
- Note: Be sure to choose an industry that no other classmate has selected.
- Determine each companys beta from a published source.
- Hint: Use or to find each companys beta.
- Find the companys financial information by putting the companys name in the search bar.
- Compare each companys beta to the industry average as provided on Aswath Damodarans website, .
- Search under Betas by Sector (US). From this page, go to Data, and within Data Breakdown select Industry, then under Discount Rate Estimation, select Levered and Unlevered Betas by Industry.
- You may want to review the handout for detailed instructions.
- Explain, in your own words, what beta is and how it is calculated.
- Explain whether beta is a reliable estimate of risk for purposes of evaluating an investment decision in one of the three companies in your selected industry.
- Identify a scholarly article or source to support your opinion.
- Include a link to this scholarly article or source in your post.
- Hint: Use or to find each companys beta.
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