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Beta Unlevering

Use the Hamada equation to strip financial leverage from an equity beta to isolate pure asset risk.

JavaScript Required: This interactive calculator requires JavaScript to function. Below is the static mathematical framework.

Inputs

Levered Beta (Observed)

Debt to Equity Ratio (D/E)

Corporate Tax Rate (%)

Unlevered Beta (Asset Beta)

This removes the financial risk (debt) to isolate the core operating risk of the business.

The Math

The Problem: When you look up a company's Beta on Yahoo Finance, it is a "Levered Beta." It reflects both the operating risk of the business AND the financial risk of their specific debt load.

The Solution: To compare the core operating risk across different companies, we must strip out the debt effect using the Hamada Equation to find the Unlevered (Asset) Beta.

Unlevered Beta = Levered Beta / [1 + ((1 - Tax Rate) × (Debt/Equity))]