Using comparable companies to estimate the betas of private companies

Bowman, Robert G. and Bush, Susan R. (2006) Using comparable companies to estimate the betas of private companies. Journal of Applied Finance, 16 2: 71-81.

Author Bowman, Robert G.
Bush, Susan R.
Title Using comparable companies to estimate the betas of private companies
Journal name Journal of Applied Finance   Check publisher's open access policy
ISSN 1534-6668
Publication date 2006
Sub-type Article (original research)
Volume 16
Issue 2
Start page 71
End page 81
Total pages 11
Editor R. Aggrawal
Place of publication Tampa, Florida
Publisher Financial Management Association
Collection year 2008
Language eng
Subject 350301 Finance
710401 Finance and investment services
Abstract Comparable company analysis (CCA) has become the standard tool for measuring the beta of a non-traded firm or division. The average beta of the comparable companies is taken as the estimate for the non-traded company. We apply a framework for testing the usefulness of CCA in estimating beta to a sample of 480 US companies. CCA provides a reasonably accurate estimate of beta, when the comparable companies are similar in size to the private company. When the comparable companies are larger than the private companies, as will generally be the case in practice, there is a significant downward bias in the estimation. Controlling for comparability in operating leverage and dividend payout ratio improves the estimate. [PUBLICATION ABSTRACT]
Q-Index Code CX
Additional Notes Email received from publisher 25 April 2007 that Journal of Applied Finance Volume 16 #2 Fall/Winter 2006 will have a copyright date of 2006 but it is not scheduled for mailing till mid to end of May 2007. Not the same thing as a publication date. Can't accept unfortunately.

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
2008 Higher Education Research Data Collection
UQ Business School Publications
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Created: Wed, 14 May 2008, 14:48:33 EST by Karen Morgan on behalf of UQ Business School