Our analysis of asset betas shows that: • Asset betas fell to very low levels of around 0.2 in the early 2000's before returning to around 0.4 on average in the late 2000s.
• Our good comparators also have relatively volatile asset betas, declining sharply to 0.1 in the early 2000's and then more recendy (post 2007) stabilising at around 0.3-0.4. The evidence suggests they were then seen as lower risk or on average no more risky than the wider sample.
The central figures shown above are median values for each group of companies. We also considered the mean across companies (either a simple mean or weighted by market capitalisations). The mean values were more volatile, with the peaks around 2007 being substantially more pronounced. They were also frequendy outside the interquartile range — higher, therefore than at least 75% of our comparator companies.
There are strong arguments to suggest that the degree of systemic risk faced under the PPAs would be towards the low end ofthat faced by many of the comparator businesses. Since it has not been possible Ín the time available to gather evidence for purely P PA -backed businesses, we have been forced to use our judgement to select an appropriate range. We consider it likely that the (relatively high) mean betas would be at the upper end of what would have been required bv private investors into the PP A -backed assets. As a result, we use the median values as our base case, and refer to high and low cases based on the interquartile range (see Figure +.11).
Figure 4.11: Asse! bela assumptions II SÉRIE-B — NÚMERO 226
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