In the Perspective of Total Beta - Accounting Beta: Which Measure Is The Best? Findings from Italian Market

The importance of the estimation of a congruous discount rate for unlisted companies is due to its use in evaluation process. The cost of equity is usually defined from CAPM that does not suit for unlisted companies. In the previous paper we analyzed the accounting beta model, using CAPM beta as comparison point, identifying the stability of the model. However CAPM beta is based on the hypothesis that all the investors diversify their portfolio, while in some context most of investor do not. So the aim of this research is to pay attention on the accounting beta, that is a model suitable for unlisted companies, starting from total beta that consider the phenomenon of non-diversification. In order to reach the goal, after a literature review, we have conduct an empirical analysis to find the differences from the approach of total beta and the approach of CAPM beta.