Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )

(Hop HipldF0AV) #1

TheregressionofDisneyreturnsagainsttheS&P 500 returns
is summarized here:


Basedonthisregression,thebetaforDisneyis1.01butthe
standarderrorof0.20suggeststhatthetruebetaforDisney
couldrangefrom0.81to 1.21(subtracting andaddingone
standarderrortobetaestimateof1.01)with67%confidence
andfrom0.61to1.41(subtractingandaddingtwostandard
errorstobetaestimateof1.01)with95%confidence.While
theserangesmayseemlarge,theyarenotunusualformost
U.S. companies. This suggests that we should consider
estimates of betas from regressions with caution.


Mostanalystswhousebetasobtainthemfromanestimation
service;Barra,ValueLine,Standard&Poor’s,Morningstar,
andBloombergaresomeofthemostwidelyusedservices.
Alltheseservicesbeginwithregressionbetasandmakewhat

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