Importance The article reviews different methods for beta estimation applied in the capital asset pricing model, which have been offered for the recent fifty years. Objectives The study aims to consider the existing methods to calculate beta coefficient and set the boundaries of their application to compute the expected return on equity of Russian companies. Methods The study uses general scientific methods of cognition, like retrospective and comparative analysis, synthesis, induction and deduction. Results We examined existing trends in beta modification and initial limitations inherent in each model. Based on the conducted research, we offer recommendations on the choice of methods to calculate beta, depending on size and type of companies. Conclusions The analysis shows that under the modern economy, the calculation of beta coefficient according to the traditional formula proposed by William Sharpe does not provide reliable results. To obtain adequate estimates of return on equity of small and medium-sized public companies, the lagged beta should be used. As for large companies issuing bonds, the calculations should consider the capital structure by using the model proposed by Peter Monkhouse. The results of the study may help value the business of Russian companies under the income approach.
Podkopaev O.A. [Methods and Approaches to the Calculation of the Beta Coefficient to Determine the Rate of Discounting of Financial and Real Investment]. Mezhdunarodnyi zhurnal prikladnykh i fundamental'nykh issledovanii = International Journal of Applied and Fundamental Research, 2015, no. 3, pp. 245–249. (In Russ.)
Roll R. A Critique of the Asset Pricing Theory's Tests. Part I: On Past and Potential Testability of the Theory. Journal of Financial Economics, 1977, vol. 4, iss. 2, pp. 129–176. URL: Link90009-5
Glagoleva L.A. [Interest Rate as a Characteristic of Return on Equity in the Capital Asset Pricing Model]. Ekonomicheskii vestnik Rostovskogo gosudarstvennogo universiteta = Economic Bulletin of Rostov State University, 2008, vol. 6, no. 3, part 2, pp. 32–37. (In Russ.)
Damodaran A. Estimating Risk Parameters. New York, Stern School of Business, 1999, 31 p. URL: Link
Nawrocki D.N. Optimal Algorithms And Lower Partial Moment: Ex-post Results. Applied Economics, 1991, vol. 23, iss. 3, pp. 465–470. URL: Link
Bawa V.S., Lindenberg E.B. Capital market equilibrium in a mean-lower partial moment framework. Journal of Financial Economics, 1977, vol. 5, iss. 2, pp. 189–200. URL: Link90017-4
Harlow W.V., Rao R.K.S. Asset Pricing in a Generalized Mean-Lower Partial Moment Framework: Theory and Evidence. The Journal of Financial and Quantitative Analysis, 1989, vol. 24, iss. 3, pp. 285–311. URL: Link
Scholes M., Williams J. Estimating betas from nonsynchronous data. Journal of Financial Economics, 1977, vol. 5, iss. 3, pp. 309–327. URL: Link90041-1
Hamidreza V.F., Amin B.F. A New Modified CAPM Model: The Two Beta CAPM. Jurnal UMP Social Sciences and Technology Management, 2015, vol. 3, iss. 1, pp. 343–346.
Fowler D.J., Rorke H.C. Risk Measurement when shares are subject to infrequent trading: Comment. Journal of Financial Economics, 1983, vol. 12, iss. 2, pp. 279–283. URL: Link90039-9
Miller S.M. Non-Synchronous Trading Bias Seems to Vary Across Countries and Over Time. URL: Link
Hamada R.S. The Effect of the Firm's Capital Structure on the Systematic Risk of Common Stocks. The Journal of Finance, 1972, vol. 27, iss. 2, pp. 435–452. URL: Link
Brusov P.N., Filatova T.V., Orekhova N.P. [Absence of Optimum Structure of the Capital in Modigliani–Miller's Modified Theory]. Vestnik Finansovogo universiteta = Bulletin of Financial University, 2013, no. 2, pp. 52–64. (In Russ.)
Conine T.E.Jr. Corporate Debt and Corporate Taxes: An Extension. The Journal of Finance, 1980, vol. 35, iss. 4, pp. 1033–1037. URL: Link
Miles J.A., Ezzell J.R. Reformulating Tax Shield Valuation: A Note. The Journal of Finance, 1985, vol. 40, iss. 5, pp. 1485–1492. URL: Link
Butler K.C., Mohr R.M., Simonds R.R. The Hamada and Conine Leverage Adjustments and the Estimation of Systematic Risk for Multisegment Firms. Journal of Business Finance & Accounting, 1991, vol. 18, iss. 6, pp. 885–901. URL: Link
Armitage S. The Cost of Capital: Intermediate Theory. Cambridge, Cambridge University Press, 2005, 353 p.
Monkhouse P.H.L. Adapting the APV valuation methodology and the beta gearing formula to the dividend imputation tax system. Accounting and Finance, 1997, vol. 37, iss. 1, pp. 69–88. URL: Link
Perevozchikov A.G. [A Stochastic Model of Constant Growth to Estimate Beta Coefficients for Nonquoted Instruments]. Finansy i kredit = Finance and Credit, 2005, no. 1, pp. 9–11. URL: Link (In Russ.)
Guseinov B.M. [Problems of Beta Calculation When Evaluating the Cost of Equity under the CAPM Method for Russian Companies]. Finansovyi menedzhment = Financial Management, 2009, no. 1, pp. 76–83. (In Russ.)
Rubinstein M.E. A Mean-Variance Synthesis of Corporate Financial Theory. The Journal of Finance, 1973, vol. 28, iss. 1, pp. 167–181. URL: Link
Bornholt G. Extending the capital asset pricing model: The reward beta approach. Accounting and Finance, 2007, vol. 47, iss. 1, pp. 69–83. URL: Link
Belov S.B. [Analysis of Using the Beta Coefficient as a Means of Systematic Financial Risk Assessment]. Trudy Dal'nevostochnogo gosudarstvennogo tekhnicheskogo universiteta, 2004, no. 138, pp. 43–44. (In Russ.)
Solov'ev A.A. [Cost of the company's equity: Comparative analysis of the capital asset pricing model (CAPM) and the arbitrage pricing model (APM)]. Ekonomika i upravlenie v XXI veke: tendentsii razvitiya = Economics and Management in the Twenty-First Century: Development Trends, 2012, no. 4, pp. 160–164. (In Russ.)
Luk'yanov K.A. [Methods to estimate beta coefficient on the Nornickel case]. Sovremennye tendentsii razvitiya nauki i tekhnologii = Current Trends in Science and Technology, 2015, no. 9-6, pp. 87–92. (In Russ.)
