What method is used to calculate equity beta?

The method of calculating equity beta involves regressing the stock return against the market return. This statistical approach analyzes how much the stock's returns move in relation to the market's returns. The basic premise is to understand the degree of correlation between the stock and the market, which is captured in the beta coefficient. A beta greater than one indicates that the stock is more volatile than the market, while a beta less than one indicates less volatility.

This regression analysis enables analysts to quantify the stock's systematic risk, which is inherent to the market and cannot be eliminated through diversification. Consequently, this method provides a clear and empirical basis for determining equity beta, making it a preferred approach in financial analysis.

In contrast, the other methods listed do not provide the same statistical foundation for calculating beta. Market survey analysis involves gathering qualitative data rather than quantitative, which is not suitable for calculating equity beta. Asset valuation techniques focus on evaluating the intrinsic value of assets rather than the relationship between stock and market returns. Weighted Average Cost of Capital (WACC) analysis pertains to the cost of financing for a company and does not directly relate to the calculation of equity beta.