To estimate pure play betas by business, to use in estimating a bottom up

End Game beta for a project or a company.

Variable Explanation
Number of firms Number of firms in the indusry grouping.

Beta Simple average across firms of each firm's

beta, taken as a weighted average of 2-
year and 5-year weekly return regression
betas, with 2-year betas weighted 2/3rds.
If the company has only a 2-year beta, it is
used.

D/E Ratio Total debt, including lease debt/ Market

Value of equity. I aggregate each number
across the firms and then compute the
aggregate debt to equity ratio.

Effective Tax Rate Effective tax rate in the most recxent 12

months.
Unlevered Beta Beta/ (1+ (1-tax rate) (D/E)). You can use
either a marginal or effective tax rate as
your option.

Cash/Firm Value Cash & Marketable Securities/ (Market

Value of Equity + Total Debt, including
lease debt. Aggregated across companies
first ans then computed.

Unlevered Beta corrected Unlevered Beta/ (1- Cash/Firm Vaue).

for cash Cash has a beta of zero. With this
calculation, I remove its effect to get a
pure play beta.

HiLo Risk Simple average of (High Price for year -

Low Price/ (High Price + Low Price). It is a
non-parametric and simple measure of
price risk.
Standard deviation Simple average across firms of each firm's
(equity) standard deviation in stock prices in the
prior 2 years, using weekly returns.

Standard deviation Simple average across firms of each firm's

(operating income) coefficient of variation in annual operating
income over prior 10 years. (Coefficient of
variation is standard deviation divided by
average operating income over the
period)
by business, to use in estimating a bottom up
any.

Why?
Law of large numbers?

I average the 2-year and 5-year betas, to

remove some noise at the company level, and
then take the simple average to remove even
more. I don't use weighted averages, since
that will make each sector's beta converge on
its largest company or companies.

My definition of debt for all things cost of

capital. I have always treated lease
commitments as debt. Now the accountants
will as well.

I need a tax rate.

Interest saves you taxes at the margin. You

should generally use a marginal tax rate, but if
you have a multinational facing different
marginal tax rates in different regions, you
may use effective instead,

Cash is usualy invested in liquid, close to

riskless investments and has a beta close to
zero.

The standard unlevered beta is an unlevered

beta for the company. If the company holds a
large amount of cash, you need to remove it
from the calculation to get a beta for just the
business.

If you don't like making distributional

assumptions and want a simple range-based
measure of risk…
This is the total risk. Beta measures only the
portion of this standard deviation that is
market-related.

If you don't like price-based measures of risk,

preferring something more intrinsic, this may
be your preferred measure of risk. (Since
operating income levels vary widely across
firms, I used the coefficient of variation.)
Date updated: 5-Jan-23 YouTube Video explaining estimation choices and process.
Created by: Aswath Damodaran, adamodar@stern.nyu.edu
What is this data? Beta, Unlevered beta and other risk measures Emerging Markets
Home Page: http://www.damodaran.com
Data website: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/data.html
Companies in each industry: https://pages.stern.nyu.edu/~adamodar/pc/datasets/indname.xls
Variable definitions: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm
Do you want to use marginal or effective tax rates in unlevering betas? Marginal
If marginal tax rate, enter the marginal tax rate to use 24.23%

Effective
Industry Name Number of firms Beta D/E Ratio Tax rate Unlevered beta Cash/Firm value Unlevered beta corrected for cash HiLo Risk
Advertising 135 1.25 10.52% 12.72% 1.16 11.17% 1.31 0.4375
Aerospace/Defense 121 1.11 12.26% 11.28% 1.02 11.65% 1.15 0.3272
Air Transport 79 1.22 87.88% 6.71% 0.73 8.11% 0.80 0.2862
Apparel 919 0.87 23.14% 14.80% 0.74 8.79% 0.81 0.3654
Auto & Truck 78 1.28 45.12% 13.07% 0.95 20.36% 1.20 0.3418
Auto Parts 527 1.42 21.56% 15.26% 1.22 10.69% 1.36 0.3369
Bank (Money Center) 459 0.80 197.33% 20.87% 0.32 23.64% 0.42 0.2222
Banks (Regional) 91 0.80 499.56% 16.12% 0.17 11.20% 0.19 0.2431
Beverage (Alcoholic) 123 1.00 2.08% 18.21% 0.99 5.41% 1.04 0.2572
Beverage (Soft) 40 0.51 4.92% 15.83% 0.50 4.92% 0.52 0.2951
Broadcasting 60 1.11 25.64% 14.61% 0.93 11.40% 1.05 0.3577
Brokerage & Investment Banking 434 0.99 234.01% 13.78% 0.36 11.14% 0.40 0.3813
Building Materials 250 1.15 23.71% 16.53% 0.97 8.16% 1.06 0.3405
Business & Consumer Services 313 0.97 12.49% 11.71% 0.89 11.66% 1.00 0.3896
Cable TV 33 1.11 36.98% 9.31% 0.87 14.84% 1.02 0.3466
Chemical (Basic) 691 1.14 33.98% 15.62% 0.91 10.19% 1.01 0.3324
Chemical (Diversified) 34 1.16 27.06% 19.58% 0.96 8.54% 1.05 0.2760
Chemical (Specialty) 625 1.06 17.53% 16.43% 0.94 8.57% 1.03 0.3396
Coal & Related Energy 93 0.86 26.08% 16.74% 0.72 26.37% 0.98 0.4088
Computer Services 548 1.05 9.85% 13.56% 0.98 5.34% 1.03 0.3705
Computers/Peripherals 220 1.28 19.21% 14.73% 1.12 16.40% 1.34 0.3395
Construction Supplies 546 1.09 45.55% 14.33% 0.81 14.50% 0.95 0.3207
Diversified 204 0.89 110.18% 13.53% 0.49 9.53% 0.54 0.2809
Drugs (Biotechnology) 304 1.44 4.10% 6.45% 1.39 8.23% 1.52 0.4232
Drugs (Pharmaceutical) 701 0.94 12.66% 14.94% 0.86 8.62% 0.94 0.3396
Education 151 0.88 34.54% 11.18% 0.70 10.83% 0.79 0.4020
Electrical Equipment 694 1.00 14.90% 12.20% 0.90 9.90% 1.00 0.3562
Electronics (Consumer & Office) 81 1.29 88.40% 14.35% 0.77 20.49% 0.97 0.3493
Electronics (General) 976 1.31 23.08% 11.91% 1.11 15.18% 1.31 0.3436
Engineering/Construction 876 1.10 154.85% 13.28% 0.51 24.21% 0.67 0.3800
Entertainment 329 1.28 17.39% 8.99% 1.13 11.13% 1.27 0.4206
Environmental & Waste Services 183 1.09 69.68% 13.87% 0.71 9.69% 0.79 0.3575
Farming/Agriculture 296 0.82 56.35% 12.80% 0.58 8.68% 0.63 0.3619
Financial Svcs. (Non-bank & Insurance) 609 0.83 162.84% 16.15% 0.37 8.76% 0.41 0.3643
Food Processing 946 0.85 33.14% 15.56% 0.68 8.48% 0.74 0.3231
Food Wholesalers 98 0.64 53.23% 13.35% 0.46 10.13% 0.51 0.3681
 Effective
Industry Name Number of firms Beta D/E Ratio Tax rate Unlevered beta Cash/Firm value Unlevered beta corrected for cash HiLo Risk
Furn/Home Furnishings 254 1.08 18.39% 14.20% 0.94 19.13% 1.17 0.3318
Green & Renewable Energy 131 1.00 58.16% 9.85% 0.70 3.84% 0.73 0.3219
Healthcare Products 340 1.13 3.99% 10.12% 1.09 9.94% 1.22 0.3829
Healthcare Support Services 195 0.95 37.42% 16.02% 0.74 14.24% 0.86 0.3702
Heathcare Information and Technology 117 1.48 3.90% 8.82% 1.44 5.08% 1.52 0.4129
Homebuilding 42 1.05 97.20% 13.08% 0.60 8.95% 0.66 0.3757
Hospitals/Healthcare Facilities 139 0.66 14.84% 17.41% 0.59 3.67% 0.61 0.2970
Hotel/Gaming 412 0.83 51.41% 8.08% 0.60 8.85% 0.65 0.3289
Household Products 300 1.03 7.14% 13.17% 0.98 6.55% 1.04 0.3530
Information Services 90 1.54 12.30% 18.36% 1.41 11.90% 1.60 0.3920
Insurance (General) 137 0.54 42.69% 14.75% 0.40 21.62% 0.52 0.2542
Insurance (Life) 85 0.86 70.01% 13.60% 0.56 13.79% 0.65 0.2804
Insurance (Prop/Cas.) 152 0.69 27.38% 16.71% 0.57 8.88% 0.62 0.2943
Investments & Asset Management 483 0.81 256.84% 7.87% 0.28 2.28% 0.28 0.2790
Machinery 865 1.05 13.11% 13.66% 0.96 9.64% 1.06 0.3428
Metals & Mining 326 1.31 33.93% 14.14% 1.04 11.74% 1.18 0.3715
Office Equipment & Services 73 0.97 12.90% 14.75% 0.88 11.41% 0.99 0.3732
Oil/Gas (Integrated) 15 0.97 14.64% 22.58% 0.87 5.81% 0.92 0.2613
Oil/Gas (Production and Exploration) 107 1.42 40.11% 14.46% 1.09 15.92% 1.29 0.3751
Oil/Gas Distribution 105 0.98 68.09% 13.12% 0.65 11.01% 0.73 0.3345
Oilfield Svcs/Equip. 229 1.02 54.09% 14.71% 0.72 7.36% 0.78 0.3405
Packaging & Container 305 0.83 31.07% 15.11% 0.67 8.74% 0.74 0.3390
Paper/Forest Products 188 1.00 83.68% 14.36% 0.61 9.79% 0.68 0.3421
Power 317 0.75 104.82% 14.44% 0.42 6.34% 0.44 0.2768
Precious Metals 71 1.41 26.59% 12.58% 1.17 9.45% 1.29 0.4182
Publishing & Newspapers 171 0.93 10.12% 11.77% 0.87 21.84% 1.11 0.3482
R.E.I.T. 261 0.60 68.41% 3.34% 0.40 2.50% 0.41 0.1837
Real Estate (Development) 757 1.03 208.57% 16.29% 0.40 19.85% 0.50 0.3603
Real Estate (General/Diversified) 220 0.95 105.07% 13.90% 0.53 11.01% 0.60 0.3050
Real Estate (Operations & Services) 352 0.92 64.53% 14.25% 0.62 8.80% 0.68 0.3435
Recreation 139 1.05 53.60% 11.79% 0.75 15.14% 0.88 0.3557
Reinsurance 29 1.18 60.63% 10.02% 0.81 22.68% 1.05 0.2875
Restaurant/Dining 141 1.03 19.78% 11.10% 0.90 6.25% 0.96 0.3634
Retail (Automotive) 103 0.86 63.70% 18.57% 0.58 9.54% 0.64 0.3204
Retail (Building Supply) 36 0.85 27.48% 15.20% 0.70 3.67% 0.73 0.3247
Retail (Distributors) 642 0.75 94.41% 14.40% 0.44 15.00% 0.51 0.3954
Retail (General) 122 0.89 68.72% 16.46% 0.59 8.45% 0.64 0.2964
Retail (Grocery and Food) 75 0.76 42.60% 16.23% 0.57 7.53% 0.62 0.3090
Retail (Online) 98 1.88 12.51% 10.37% 1.71 7.70% 1.86 0.4902
Retail (Special Lines) 197 1.03 27.52% 15.72% 0.86 8.16% 0.93 0.3345
Rubber& Tires 71 1.18 45.28% 15.27% 0.88 9.57% 0.97 0.2987
Semiconductor 485 1.70 10.72% 10.76% 1.57 11.39% 1.77 0.3728
Semiconductor Equip 253 1.95 8.18% 13.94% 1.83 9.13% 2.02 0.3635
Shipbuilding & Marine 236 1.13 51.35% 12.54% 0.81 30.82% 1.18 0.3345
Shoe 58 0.95 22.37% 15.36% 0.81 8.92% 0.89 0.3343
Software (Entertainment) 57 1.86 12.01% 10.08% 1.71 5.76% 1.81 0.4716
 Effective
Industry Name Number of firms Beta D/E Ratio Tax rate Unlevered beta Cash/Firm value Unlevered beta corrected for cash HiLo Risk
Software (Internet) 42 1.14 22.06% 9.83% 0.98 9.20% 1.08 0.4044
Software (System & Application) 492 1.38 3.88% 8.88% 1.34 8.90% 1.47 0.4288
Steel 519 1.30 50.37% 15.62% 0.94 11.93% 1.07 0.3626
Telecom (Wireless) 59 0.81 42.42% 19.61% 0.61 8.30% 0.67 0.2456
Telecom. Equipment 293 1.25 16.52% 9.26% 1.11 13.36% 1.28 0.3517
Telecom. Services 138 0.75 37.44% 14.50% 0.58 7.80% 0.63 0.2964
Tobacco 31 0.57 1.06% 23.35% 0.56 5.68% 0.60 0.2507
Transportation 220 1.04 63.59% 16.14% 0.70 11.02% 0.79 0.3417
Transportation (Railroads) 17 1.04 28.64% 20.30% 0.86 10.30% 0.96 0.2253
Trucking 110 1.06 71.52% 14.04% 0.69 8.36% 0.75 0.3521
Utility (General) 13 0.68 37.41% 8.34% 0.53 5.17% 0.56 0.2020
Utility (Water) 71 0.67 110.01% 13.43% 0.37 10.10% 0.41 0.2587
Total Market 24853 1.05 64.59% 13.63% 0.71 13.31% 0.81 0.3462
Total Market (without financials) 22403 1.08 38.31% 13.50% 0.83 10.87% 0.94 0.3506
 Average Beta over time

Average
Standard deviation of equity Standard deviation in operating income (last 10 years) 2019 2020 2021 2022 (2019-23)
40.02% 23.63% 1.39 1.46 1.30 1.30 1.35
31.39% 25.75% 1.14 1.10 1.24 1.23 1.17
28.65% 198.25% 0.57 0.59 0.92 0.91 0.76
36.06% 24.29% 0.72 0.64 0.85 0.85 0.77
29.07% 16.21% 1.28 1.13 1.27 1.26 1.23
32.58% 9.71% 1.16 1.11 1.51 1.50 1.33
20.86% 41.92% 0.42 0.43 0.56 0.56 0.48
27.19% NA 0.35 0.26 0.23 0.22 0.25
28.32% 25.19% 1.05 1.06 1.10 1.10 1.07
26.67% 45.82% 0.53 0.36 0.70 0.70 0.56
36.02% 22.41% 0.78 0.70 1.06 1.06 0.93
36.68% 83.47% 0.51 0.54 0.42 0.41 0.46
33.88% 36.48% 0.82 0.79 1.11 1.11 0.98
37.65% 23.92% 1.18 0.94 0.89 0.89 0.98
28.91% 36.96% 1.06 1.21 1.05 1.04 1.07
32.42% 45.67% 0.96 0.92 1.03 1.03 0.99
28.39% 22.99% 0.86 0.73 1.28 1.27 1.04
32.87% 47.30% 1.03 0.93 1.08 1.08 1.03
41.32% 47.82% 1.13 1.39 1.06 1.05 1.12
36.00% 25.92% 1.06 1.04 1.05 1.05 1.05
30.76% 31.89% 1.53 1.40 1.45 1.45 1.43
29.82% 35.87% 0.96 0.97 1.04 1.03 0.99
25.67% 24.36% 0.47 0.41 0.56 0.55 0.51
39.04% 80.46% 1.45 1.50 1.50 1.50 1.49
31.33% 19.74% 1.14 1.13 1.07 1.07 1.07
35.54% 37.11% 1.32 1.14 1.01 1.01 1.05
34.21% 34.35% 1.06 1.08 1.00 1.00 1.03
31.85% 47.25% 1.15 1.31 1.11 1.11 1.13
31.30% 43.21% 1.49 1.47 1.36 1.36 1.40
35.80% 32.65% 0.89 0.72 0.76 0.75 0.76
40.86% 33.33% 1.40 1.26 1.19 1.19 1.26
34.85% 49.25% 1.06 1.10 0.70 0.70 0.87
32.44% 21.94% 0.63 0.64 0.79 0.78 0.70
35.37% 39.16% 0.42 0.34 0.45 0.45 0.41
29.91% 29.89% 0.73 0.69 0.85 0.84 0.77
35.62% 28.61% 0.67 0.61 0.61 0.60 0.60
 Average
Standard deviation of equity Standard deviation in operating income (last 10 years) 2019 2020 2021 2022 (2019-23)
29.67% 38.62% 1.11 1.07 1.21 1.20 1.15
32.73% 35.22% 0.68 0.59 0.70 0.69 0.68
37.22% 112.11% 1.34 1.42 1.25 1.25 1.30
31.66% 44.05% 1.04 0.90 0.86 0.86 0.90
37.65% 110.09% 1.80 1.65 1.51 1.51 1.60
37.82% 89.44% 0.76 0.57 1.52 1.51 1.00
27.34% 28.97% 0.78 0.58 0.81 0.81 0.72
33.02% 96.11% 0.82 0.67 0.77 0.76 0.74
31.12% 21.03% 0.98 1.04 1.12 1.12 1.06
36.07% 18.45% 1.19 1.10 1.41 1.41 1.34
23.54% 21.89% 0.47 0.47 0.70 0.70 0.57
24.02% 40.21% 0.72 0.73 0.77 0.76 0.73
27.15% 13.92% 0.44 0.43 0.81 0.81 0.62
31.47% 59.18% 0.21 0.17 0.37 0.36 0.28
33.41% 38.47% 1.14 1.15 1.08 1.08 1.10
38.23% 58.71% 1.10 0.98 1.19 1.18 1.13
35.59% 25.20% 0.80 0.84 1.09 1.08 0.96
24.15% 64.99% 0.96 1.11 1.04 1.03 1.01
39.20% 48.04% 1.32 1.14 1.50 1.49 1.35
30.27% 20.49% 0.86 0.89 0.83 0.82 0.83
33.06% 48.71% 1.10 0.98 1.05 1.04 0.99
31.50% 22.14% 0.67 0.65 0.90 0.90 0.77
31.21% 42.28% 0.69 0.64 0.86 0.86 0.74
27.20% 15.58% 0.52 0.52 0.55 0.55 0.52
47.70% 79.95% 1.21 0.97 1.27 1.26 1.20
34.38% 10.42% 1.14 1.12 0.93 0.92 1.04
15.00% 24.92% 0.33 0.31 0.68 0.67 0.48
32.87% 38.94% 0.69 0.65 0.52 0.51 0.57
28.03% 16.71% 0.79 0.74 0.65 0.64 0.68
31.27% 13.43% 0.63 0.59 0.76 0.75 0.68
32.33% 28.44% 0.82 0.92 0.88 0.87 0.87
30.17% 38.44% 0.96 0.96 1.52 1.51 1.20
35.41% 42.81% 1.01 0.88 0.98 0.98 0.96
30.95% 31.53% 0.72 0.72 0.77 0.77 0.72
28.41% 17.55% 1.14 1.26 1.19 1.18 1.10
36.71% 40.40% 0.62 0.60 0.51 0.50 0.55
27.99% 9.73% 0.90 0.91 0.79 0.78 0.80
28.59% 12.77% 0.73 0.65 0.60 0.59 0.64
43.95% NA 1.46 1.49 1.73 1.73 1.65
31.75% 17.81% 1.00 0.83 1.04 1.04 0.97
28.42% 17.81% 0.70 0.70 1.12 1.11 0.92
35.87% 58.26% 1.73 1.58 1.66 1.66 1.68
32.07% 71.42% 1.66 1.82 2.08 2.08 1.93
34.75% 135.67% 0.69 0.67 1.07 1.06 0.93
36.07% 24.34% 0.91 0.77 1.09 1.08 0.95
42.24% 56.34% 1.78 1.38 1.42 1.42 1.56
 Average
Standard deviation of equity Standard deviation in operating income (last 10 years) 2019 2020 2021 2022 (2019-23)
38.78% 56.62% 0.85 1.18 1.09 1.08 1.06
39.67% 26.23% 1.46 1.59 1.48 1.47 1.50
35.86% 66.63% 0.89 0.77 1.10 1.09 0.98
23.93% 17.43% 0.76 0.66 0.89 0.89 0.77
33.43% 33.96% 1.45 1.47 1.24 1.24 1.34
29.59% 6.63% 0.81 0.64 0.79 0.79 0.73
24.46% 28.86% 0.83 0.77 0.84 0.84 0.78
31.92% 19.89% 0.87 0.87 0.86 0.86 0.85
23.39% 25.69% 1.30 1.14 0.88 0.88 1.03
33.47% 73.60% 0.72 0.65 0.85 0.84 0.76
19.89% 14.32% 0.41 0.44 0.52 0.51 0.49
32.92% 22.91% 0.82 0.81 0.48 0.48 0.60
32.92% 28.98% 0.84 0.82 0.90 0.89 0.85
33.22% 29.04% 0.93 0.91 1.00 1.00 0.96
Effective
Marginal