Evaluation of Beta CAPM under Financial Leverage Scenarios in Viet Nam Real Estate Industry under Financial Leverage

Abstract

This paper evaluates the impacts of external financing on market risk for the listed firms in the Vietnam real estate industry. In order to propose evidence for establishing policies in risk management and governance, authors use live data of stock price and rates form bank system and Vietnam stock exchange. Research findings show that when estimating asset and equity beta of total 45 listed companies in Viet Nam real estate industry with a proper traditional model, beta values, in general, for many institutions are acceptable. Then, under 3 different scenarios of changing leverage (in 2011 financial reports, 30% up and 20% down), we recognized that the risk level, measured by equity and asset beta mean, decreases (0,348) when leverage increases to 30% and it increases (0,385) if leverage decreases down to 20%. And by changing leverage in 3 scenarios, we recognized the dispersion of risk level, measured by equity beta var, increases if the leverage increases to 30%. And the asset beta var value is quite small, showing leverage efficiency.