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How is the Beta calculated?

Calculate Beta, calculation, formula, date and period, monthly, yearly, weekly observations, 2 to 5 years, index, indices, Blume

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Overview

Valutico's Beta calculations are methodologically comparable to CapitalIQ's Beta calculation approach. Our default method involves a regression of stock and index returns to determine the raw equity beta. This calculation uses 5 years of monthly returns and is performed in real time as of the valuation date to ensure up-to-date results.

Methodology

  • Raw Beta Calculation: Regression of stock and index returns using 5 years of monthly data (no adjustments applied to raw Betas).

  • Real-Time Processing: Beta calculations are always current as of the valuation date.

Default Index Benchmarks

Valutico follows CapitalIQ’s approach for index selection. The default benchmarks used are:

  • S&P 500 – for U.S. stocks

  • S&P/TSX Composite – for Canadian stocks

  • MSCI EAFE – for Developed Markets

  • MSCI Emerging Markets – for all other international stocks

Customisation Options

To allow flexibility and improve accuracy based on selected peers, users can customise Beta calculations by choosing a specific index for each peer. The following indexes are available for selection:

S&P Indexes

  • S&P

  • S&P 500

  • S&P/TSX Composite

  • S&P Latin America 40

  • S&P ASX 200

  • S&P Europe 350

  • S&P Asia 50

FTSE Indexes

  • FTSE 100

  • FTSE Latin America

MSCI Indexes

  • MSCI Asia Pacific

  • MSCI Brazil

  • MSCI EAFE

  • MSCI Emerging Markets

  • MSCI South Africa

Adjusting Time Horizons and Intervals

Users can modify the Time Horizon and Interval for Beta calculations. These settings are accessible at the Beta section in the Peer Selection screen.



To learn more about the settings for Beta features, click here for detailed information.

Available Time Horizons:

  • 1 year

  • 3 years

  • 5 years

Available Intervals:

  • Daily

  • Weekly

  • Monthly

Note: The combination of 5-year Daily data is not available due to excessive data points, which may cause errors or slow platform performance.

Unlevered Beta Calculation

For unlevering Beta, Valutico applies the Modigliani-Miller formula to derive unlevered asset Betas.

To learn more about Unlevered Beta, click here for additional details.

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