B-Values : Risk Calculation for Axfood and Volvo Bottom up beta approach vs. CAPM beta

by Ljungström, Divesh

Abstract (Summary)
The aim of this thesis is to study the risk for two Swedish companies, Axfood and Volvo. To test the required return on equity, a bottom-up beta approach and a CAPM regression beta are used. This thesis concludes that the bottom-up beta gives a truer reflection and a more updated beta value than a CAPM regression beta on the firm’s current business mix, the CAPM beta takes only the past stock prices into consideration. The empirical results for Volvo conclude that the levered bottom-up beta is 1.09 and the CAPM ? is 0.52 for Volvo. The empirical results for Axfood which is categorized as consumer goods sector implies that the levered bottom-up beta is 0.87 while the CAPM regression beta is 0.29.
Bibliographical Information:


School:Högskolan i Skövde

School Location:Sweden

Source Type:Master's Thesis

Keywords:capm jensen’s measure alpha security market line bottom up betas levered beta unlevered required return on equity debt ratio


Date of Publication:10/01/2007

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