Since each company’s capital structure is different, an analyst will often want to look at how “risky” the company’s assets are, regardless of what percentage of debt or equity funding it has.
When you look up a company’s beta on Bloomberg, the default number you see is levered, reflecting the debt of that company. For example, a company with a beta of 1.5 has returns that are 150% as volatile as the market it’s being compared to. Equity beta allows investors to gauge how sensitive a security might be to macro-market risks. In other words, it’s a measure of risk, and it includes the impact of a company’s capital structure and leverage. Levered beta (or “equity beta”) is a measurement that compares the volatility of returns of a company’s stock against those of the broader market. It is also commonly referred to as “asset beta” because the volatility of a company without any leverage is the result of only its assets. It is also known as the volatility of returns for a company, without taking into account its financial leverage. It compares the risk of an unlevered company to the risk of the market. Asset Beta) is the beta of a company without the impact of debt. Updated OctoWhat is Unlevered Beta (Asset Beta)?
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