Beta (β) measures the sensitivity of an asset's or company's return to overall market movements. A beta above 1 indicates higher volatility than the market (more risk), below 1 lower volatility, and zero or negative beta reflects uncorrelated or inverse returns. In the CAPM framework, beta is the key parameter for estimating the cost of equity and, by extension, the WACC. For unlisted companies, beta is estimated from listed comparables, unlevered to strip out financial structure effects (asset beta), then relevered to the target's capital structure.

‍

Example: to value an unlisted Swiss industrial SME, Hectelion identifies 6 listed sector comparables with a median levered beta of 1.15. After unlevering (asset beta: 0.82) and relevering to the target's capital structure (debt/equity: 30%), the retained levered beta is 0.98 — used in CAPM to derive a cost of equity of 9.4% and a WACC of 8.1%.

‍

At Hectelion, beta construction for unlisted companies is carefully documented — it is a key focus in valuation reports submitted to auditors and tax authorities.