Estimating divisional betas with diversified firm data
Abstract
The pure-play technique for estimating divisional cost of capital relies on the use of betas of undiversified firms as proxy divisional betas. This article identifies in this procedure three potential sources of bias that arise from differences between diversified and undiversified firms. A new procedure for using diversified firm data to obtain product-line betas that avoids these sources of bias is developed and tested. © 1992 Kluwer Academic Publishers.
Publication Title
Review of Quantitative Finance and Accounting
Recommended Citation
Wood, R., Mcinish, T., & Lawrence, K. (1992). Estimating divisional betas with diversified firm data. Review of Quantitative Finance and Accounting, 2 (1), 89-96. https://doi.org/10.1007/BF00243986
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