Summary
Some authors have postulated that Total Beta (“Tβ”) is an appropriate measure of risk for undiversified investors to use in developing the cost of equity capital for valuing a privately held company. This paper offers a mathematical analysis of Total Beta based upon the Capital Market Theory in the Expected Return-standard deviation framework, reviews the arguments offered by supporters of Total Beta, and challenges their assumptions and logic. The author offers the first direct evidence that refutes these assertions and arguments.
Total Beta—A Capital Market Analysis with Empirical Evidence
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