B-Values : Risk Calculation for Axfood and Volvo Bottom up beta approach vs. CAPM beta

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The aim of this thesis is to study the risk for two Swedish companies, Axfood and Volvo. To test the required return on equity, a bottom-up beta approach and a CAPM regression beta are used. This thesis concludes that the bottom-up beta gives a truer reflection and a more updated beta value than a CAPM regression beta on the firm’s current business mix, the CAPM beta takes only the past stock prices into consideration. The empirical results for Volvo conclude that the levered bottom-up beta is 1.09 and the CAPM ß is 0.52 for Volvo. The empirical results for Axfood which is categorized as consumer goods sector implies that the ...