Hi there For exam purposes, when calculating beta for CAPM, do we use arithmetic or geometric means? The textbook talks about "the average of the measured returns" but does not specify whether it is arithmetic or geometric. Thanks for any clarification.
There has never been a question in CT2 where you have had to calculate beta from the raw data. It is usually about using the result in capital project appraisal and capital structure decisions. If it were to come up, I am sure they would accept either.
Ah ok, that's good. I saw something earlier in the chapter about use of arithmetic vs geometric means for historical returns. However, the reasoning didn't appear to carry onto the actual calculation of beta. That said, thanks for your help.
