Unlevered Beta


DEFINITION of 'Unlevered Beta'

A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta of a company without any debt. Unlevering a beta removes the financial effects from leverage.

The formula to calculate a company's unlevered beta is:

Unlevered Beta

BL is the firm's beta with leverage.
Tc is the corporate tax rate.
D/E is the company's debt/equity ratio.


Loading the player...

BREAKING DOWN 'Unlevered Beta'

This number provides a measure of how much systematic risk a firm's equity has when compared to the market. Unlevering the beta removes any beneficial effects gained by adding debt to the firm's capital structure. Comparing companies' unlevered betas gives an investor a better idea of how much risk they will be taking on when purchasing a firms' stock.

  1. Debt/Equity Ratio

    Debt/Equity Ratio is debt ratio used to measure a company's financial ...
  2. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  3. Capital Structure

    A mix of a company's long-term debt, specific short-term debt, ...
  4. Rho

    The rate at which the price of a derivative changes relative ...
  5. Beta

    Beta is a measure of the volatility, or systematic risk, of a ...
  6. Leverage

    1. The use of various financial instruments or borrowed capital, ...
Related Articles
  1. Investing Basics

    Beta: Know The Risk

    Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here.
  2. Investing Basics

    Unlevered Beta

    Learn about how this number provides a measure of how much systematic risk a firm's equity has compared to the market.
  3. Investing Basics

    Beta: Gauging Price Fluctuations

    Learn how to properly use this measure that can help you meet your criteria for risk.
  4. Options & Futures

    Getting To Know The "Greeks"

    Understanding price influences on options positions requires learning about delta, theta, vega and gamma.
  5. Options & Futures

    Using "The Greeks" To Understand Options

    These risk-exposure measurements help traders detect how sensitive a specific trade is to price, volatility and time decay.
  6. Home & Auto

    Simple Ways To Invest In Real Estate

    Owning property isn't always easy, but there are plenty of perks. Find out how to buy in.
  7. Stock Analysis

    Starbucks' 6 Key Financial Ratios

    Discover the key financial ratios that are important when analyzing the financial health, profitability and efficiency of Starbucks' operations.
  8. Options & Futures

    Ultra ETFs Are Not Your Father's ETFs

    Ultra ETFs can add huge returns to your portfolio, but there's a lot of risk and volatility involved with these leveraged ETFs.
  9. Credit & Loans

    Explaining Leveraged Loans

    Leveraged loans are loans extended to companies or people who already have large amounts of debt.
  10. Stock Analysis

    The Biggest Risks of Investing in Boeing Stock

    Learn about the biggest risks faced by Boeing investors. How should investors think about cyclicality, debt, sales volumes and customer concentration?
  1. Why should I register as a Limited Liability Company (LLC) if I am self-employed ...

    Debt affects a company's levered beta in that increasing the total amount of a company's debt will increase the value of ... Read Full Answer >>
  2. What are the practical uses for unlevered beta?

    A security's unlevered beta measures the volatility and performance of that security in relation to the performance of the ... Read Full Answer >>
  3. When is it better to use unlevered beta than levered beta?

    It is better to use an unlevered beta over a levered beta when a company or investor wishes to measure a publicly traded ... Read Full Answer >>
  4. How does unlevered beta help in risk management?

    Financial analysts and statisticians use unlevered beta to compare the risk of a single investment against the risk of investing ... Read Full Answer >>
  5. How should investors interpret unlevered beta?

    Unlevered beta is the beta of a company that focuses only on its assets. It removes the amount of debt a company has in order ... Read Full Answer >>
  6. Can mutual funds use leverage?

    Traditionally, mutual funds have not been considered leveraged financial products. However, a number of new products have ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
Trading Center