Corporate Finance: Instructor\'s Manual Applied Corporate Finance

(Amelia) #1
Aswath Damodaran 125

A Few Questions


! The R squared for Deutsche Bank is very high ( 62 %), at least relative to U.S.
firms. Why is that?
! The beta for Deutsche Bank is 1. 04.


  • Is this an appropriate measure of risk?

  • If not, why not?
    ! If you were an investor in primarily U.S. stocks, would this be an appropriate
    measure of risk?


The R-squared is high, because Deutsche Bank is such a large percentage of the


index.


This beta is a reasonable measure of risk only to those whose entire portfolio is


composed of large German companies.


If you were primarily a US investor, you would look at the risk that DBK would


add on to a US index.

Free download pdf