HomeCFACFA Level 2CFA Level 2 | Corporate Finance: Adjusting Beta Using the Blume Method

CFA Level 2 | Corporate Finance: Adjusting Beta Using the Blume Method

  • May 14, 2020
  • Posted by: Fabian Moa, CFA, FRM, CTP, AFM, FMVA, FSA Credential
  • Categories: CFA, CFA Level 2
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CFA Level 2

Topic: Equity Valuation

Reading: Return Concepts

 

When given a raw beta (or regression beta), which is based on historical data, we will then adjust the beta using the Blume method. The adjusted beta will reflect a forward-looking basis, where we assume that the stock beta should regress towards 1, the market beta, in the long run.

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