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Developing and Selecting CAPM Betas (Webinar Replay).

Updated: Jul 24

Today's post is by Carla S. Nunes, CFA, ABV. Carla is a Managing Director in the Office of Professional Practice of Kroll and a Kroll Institute Fellow. In addition, Carla is the Global Leader of Kroll's Valuation Digital Solutions group, which produces cost of capital thought leadership content and data housed in the Cost of Capital Navigator online platform. She has over 25 years of experience in valuation, financial reporting and tax, conducting numerous business and asset valuations for a variety of purposes including purchase price allocations, goodwill and asset impairments, mergers & acquisitions, tax restructuring, debt analysis, and gift and estate tax planning. Carla also has extensive experience working with multinational companies, having addressed complex tax, international cost of capital, and foreign exchange issues. She is a co-author of various articles, studies, and books, including the “Valuation Handbook” series and is a co-creator of the Kroll Cost of Capital Navigator. She is also a contributing author to “Cost of Capital: Applications and Examples”, 5th edition, by Shannon Pratt and Roger Grabowski. Carla is a Practitioner Director in the Board of the Financial Management Association (FMA) International and a member of the Education Committee of the International Institute of Business Valuers (iiBV).

Since the outbreak of COVID-19, industry risks have changed very materially. With a backdrop of high inflation, interest rate hikes and recent market events, investors and private companies are faced with higher cost of capital, which has a direct impact on their investment decisions. To determine the most cost-effective means of raising capital and evaluate capital allocation options, companies need to understand how betas from industry peers have evolved in the current environment.

Kroll Managing Director Carla Nunes, Director Kevin Madden and Vice President Aaron Russo hosted this webinar for a case study discussion on developing and selecting CAPM Betas. They also discussed how to assess different beta estimates and gave a walkthrough of the new Company-Level Beta module in the Kroll Cost of Capital Navigator.

Key takeaways:

  • Review which inputs impact a historical CAPM beta calculation

  • Distinguish different methods of estimating betas

  • Evaluate the statistical quality of a beta estimate

  • Identify circumstances when different unlevering and relevering beta methods are more appropriate

  • Utilise the new Company-level Beta Module in the Cost of Capital Navigator online platform to evaluate beta estimates.

Watch the Webinar*:

* This webinar has been prepared, recorded, and presented by Kroll.

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