susana

traditional balance sheet - use Debt (with a beta of 0), Equities with the Equity Beta
and calculates the Asset Beta (Assets are only the Operating Assets).

Equity Beta * Equity MV / (Total Assets (excl. pension asset)) = Asset Beta

Since the assets only have operating assets - asset beta = operating asset beta.

With the Economic Balance sheet: (assuming Pension Assets = Pension Liabs -- fully funded pension plan).
when you introduce the pension assets - total assets increase, and total balance sheet beta changes since

Equity beta * Equity MV / (Total Assets incl. Pension Assets) = Total Asset beta.

Operating Asset * Op Asset beta + Pension assets * Pension assets beta = Total Assets * Total Asset beta.

As a result of introduction of the pension asset beta and as a result of the above equality - operating assets beta changes.

CP