How To Find Beta Of A Stock?

What is the beta of a stock?

Beta is a measure of a stock’s volatility in relation to the overall market. If a stock moves less than the market, the stock’s beta is less than 1.0. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.

How is beta calculated in CAPM?

Beta coefficient is an important input in the capital asset pricing model (CAPM). CAPM estimates a stock’s required rate of return (cost of equity) as the sum of the risk free interest rate and the stock’s equity risk premium.

Formula.

β = Covariance of Market Return with Stock Return
Variance of Market Return

How do you calculate debt beta?

Beta on Debt Can be Derived from Bond Yields

Without taxes, the formula for Bu is Bu = Be x Equity/Capital + Bd x Debt/Capital.