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- Title
Estimating Divisional Betas with Diversified Firm Data.
- Authors
Wood, Robert A.; McInish, Thomas H.; Lawrence, Kenneth D.
- 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.
- Subjects
CAPITAL costs; CAPITAL investments; DIVERSIFIED companies; DIVERSIFICATION in industry; BUSINESS enterprises
- Publication
Review of Quantitative Finance & Accounting, 1992, Vol 2, Issue 1, p89
- ISSN
0924-865X
- Publication type
Article
- DOI
10.1007/BF00243986