Adjusted Beta
A regression beta pulled toward 1.0, most commonly by the Blume adjustment of two-thirds raw plus one-third market, on the empirical observation that betas mean-revert over time. It is a shrinkage estimator, not a theory. Important in practice: Bloomberg and most data providers report the ADJUSTED figure in the headline slot, so applying the adjustment again to a number you pulled from a screen shrinks it twice. Work through it interactively in the Beta Refresher lab at /labs/beta.
Practise it
A slope, not a speed. Generate a series with a beta you choose, regress it back, and see how far one estimate lands from the truth. Raw, adjusted, unlevered, bottom-up.
Open Beta Refresher, free, 10 minKeep reading
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