In accordance with the well-known financial leverage effect, decreases in stock prices cause an increase in the levered equity beta for a given unlevered beta. However, as growth options are more volatile and have higher risk than assets in place, a price decrease may decrease the unlevered...

It is well known that an unbiased forecast of the terminal value of a portfolio requires compounding at the arithmetic mean return over the investment horizon. However, the maximum-likelihood practice, common with academics, of compounding at the estimator of mean return results in upward biased...