Aswath Damodaran 127
Aracruz’s Beta?
Aracruz ADR vs S&P 5 00
S&P
Ara
cru
z^ A
DR
80
60
40
20
0
Aracruz vs Bovespa
BOVESPA
- 50 - 40 - 30 - 20 - 10 0 10 20 30
Ara
cru
z
140
120
100
80
60
40
20
0
Aracruz ADR = 2. 80 % + 1. 00 S&P Aracruz = 2. 62 % + 0. 22 Bovespa
Two very different views of Aracruz’s risk. Which one is the right one?
The Bovespa is a narrow index and Aracruz’s beta estimated against it may tell
us nothing about its risk.
The regression against the S&P 500 is more informative, but the standard error
is large...
