To estimate pure play betas by business, to use in estimating a bottom u

End Game beta for a project or a company. 

Variable Explanation
Number of firms Número de empresas de la agrupación
industrial.
Beta Promedio simple entre las empresas de la
beta de cada empresa, tomado como un
promedio ponderado de betas de
regresión de rendimiento semanal de 2 y 5
años, con betas de 2 años ponderadas 2/3.
Si la compañía solo tiene una beta de 2
años, se usa.

D/E Ratio Deuda total, incluida la deuda de

arrendamiento / Valor de mercado del
capital. Agrego cada número en todas las
empresas y luego calculo la relación deuda
agregada a capital.

Effective Tax Rate Tasa impositiva efectiva en los últimos 12

meses.
Unlevered Beta Beta/ (1+ (1-tasa impositiva) (D/E)). Puede
usar una tasa impositiva marginal o
efectiva como su opción.

Cash/Firm Value Cash & Marketable Securities/ (Market

Value of Equity + Total Debt, including
lease debt. Aggregated across companies
first ans then computed.

Unlevered Beta corrected Unlevered Beta/ (1- Cash/Firm Vaue).

for cash Cash has a beta of zero. With this
calculation, I remove its effect to get a
pure play beta.

HiLo Risk Simple average of (High Price for year -

Low Price/ (High Price + Low Price). It is a
non-parametric and simple measure of
price risk.

Standard deviation Simple average across firms of each firm's

(equity) standard deviation in stock prices in the
prior 2 years, using weekly returns.
Standard deviation Simple average across firms of each firm's
(operating income) coefficient of variation in annual operating
income over prior 10 years. (Coefficient of
variation is standard deviation divided by
average operating income over the
period)
by business, to use in estimating a bottom up
any. 

Why?
¿Ley de los grandes números?

Promedio las betas de 2 y 5 años, para

eliminar algo de ruido a nivel de empresa, y
luego tomo el promedio simple para eliminar
aún más. No utilizo promedios ponderados, ya
que eso hará que la beta de cada sector
converja en su empresa o empresas más
grandes.

Mi definición de deuda para todas las cosas

costo de capital. Siempre he tratado los
compromisos de arrendamiento como deuda.
Ahora los contadores también lo harán.

Necesito una tasa de impuestos.

Interest saves you taxes at the margin. You

should generally use a marginal tax rate, but if
you have a multinational facing different
marginal tax rates in different regions, you
may use effective instead,

Cash is usualy invested in liquid, close to

riskless investments and has a beta close to
zero. 

The standard unlevered beta is an unlevered

beta for the company. If the company holds a
large amount of cash, you need to remove it
from the calculation to get a beta for just the
business.

If you don't like making distributional

assumptions and want a simple range-based
measure of risk…

This is the total risk. Beta measures only the

portion of this standard deviation that is
market-related.
If you don't like price-based measures of risk,
preferring something more intrinsic, this may
be your preferred measure of risk. (Since
operating income levels vary widely across
firms, I used the coefficient of variation.)
Date updated: 5-Jan-21 YouTube Video explaining estimation choices and process.
Created by: Aswath Damodaran, adamodar@stern.nyu.edu
What is this data? Beta, Unlevered beta and other risk measures Emerging Markets
Home Page: http://www.damodaran.com
Data website: https://www.stern.nyu.edu/~adamodar/New_Home_Page/data.html
Companies in each industry: https://www.stern.nyu.edu/~adamodar/pc/datasets/indname.xls
Variable definitions: https://www.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm
Do you want to use marginal or effective tax rates in unlevering betas? Marginal
If marginal tax rate, enter the marginal tax rate to use 26.30%
Effective
Industry Name Number of firms Beta D/E Ratio Tax rate Unlevered beta Cash/Firm value Unlevered beta corrected for cash HiLo Risk
Business & Consumer Services 285 0.81 13.42% 12.88% 0.73 10.15% 0.82 0.4274
 Average Beta over time
Average
Standard deviation of equity Standard deviation in operating income (last 10 years) 2018 2019 2020 (2018-21)
31.23% 38.83% 1.02 1.18 0.94 0.99
Effective
Marginal