The total beta measure devised by Damodaran measures the the beta of private business owned by undiversified investor. But how do we account for those owned by partially diversified investor? This might be a lazy way to estimate but maybe we can estimate the number of businesses the partially diversified investor has and adjust according to the ratio presented in the table in http://en.wikipedia.org/wiki/Diversification_(finance)? What do you guys think?

Question

The total beta measure devised by Damodaran measures the the beta of private business owned by undiversified investor.  But how do we account for those owned by partially diversified investor?  This might be a lazy way to estimate but  maybe we can estimate the number of businesses the partially diversified investor has and adjust according to the ratio presented in the table in http://en.wikipedia.org/wiki/Diversification_(finance)?  What do you guys think?

anonymous · Answer

To illustrate my point...

anonymous · Answer

Simple. Estimate the total beta by using the correlation of the private investor's portfolio (which should rise as he or she gets more diversified)

anonymous · Answer

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anonymous · Answer

How would i go about finding the correlation of the private investor's portfolio against the market?

anonymous · Answer

You would have to know what was in the private investor's portfolio in the first place (I thought that was the premise of the question)