Identify and analyse the factors that can affect the reliability of a firm’s beta

Identify and analyse the factors that can affect the reliability of a firm’s beta

Identify and analyse the factors that can affect the reliability of a firm’s beta. Do you think the recent global financial crisis has had an impact on a firm’s beta, its cost of equity and its cost of capital? What are the likely implications, for both the firm and its providers of capital?

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Identify and analyze the factors that can affect the reliability of a firm’s beta

There are several factors that can be identified and analyzed that affect the reliability of a firm’s beta. To do this, one must understand what a firm’s beta means and how it can be calculated. A company’s beta refers to a measure that is used to gauge the systematic risk, or volatility of the securities of the company in the broader market (Rutterford, & Davison, 2017). It assesses the manner in which the value of the shares of the company change over time due to changes that are being experienced in the market. In capital asset pricing model, it is used to assess the returns of some of the assets or securities in the securities exchange.

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