Editing Arctic Shores
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As with any investment, investing in Arctic Shores carries a level of risk. Overall, based on the Arctic Shores' adjusted beta (i.e. 6.93), the degree of risk associated with an investment in Arctic Shores is 'high'. | As with any investment, investing in Arctic Shores carries a level of risk. Overall, based on the Arctic Shores' adjusted beta (i.e. 6.93), the degree of risk associated with an investment in Arctic Shores is 'high'. | ||
Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used the two available share price Arctic Shores data points. We note that the amount of available data observations for Arctic Shores is less than what's typically used in the five years of monthly data beta calculation (i.e. two observations vs. 60 observations), and accordingly, calculating the beta of such a company has been considered by many to be abnormal; however, for the benefit of simplifying investment comparisons and decision making, we believe that a single standardised risk measure is useful, and that the most appropriate measure is beta. | |||
The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'high' risk, it must have a beta value of 1.5 or more. Further information about the beta ratings can be found in the appendix section of this report. | The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'high' risk, it must have a beta value of 1.5 or more. Further information about the beta ratings can be found in the appendix section of this report. |