Levered beta

In the Capital asset pricing model (CAPM), the levered beta is the relevant measure of total equity risk.

This total risk results from both:

(i) the underlying business risk and

(ii) the additional financial risk resulting from the level of debt in the firm’s financial structure (financial gearing).

The level of debt may be an actual current level, or a future assumed or prospective level, used for modelling purposes.

The equity beta is also known as Geared beta or Equity beta.

See also

• Beta
• Capital asset pricing model
• Equity
• Equity risk
• Financial model
• Gearing
• Leverage
• Ungeared beta