mik82

Very much appreciate the explanation CP.

You don't have to continue with this, but I'm still stuck on this point. The beta of the operating assets doesn't seem like it should change as long as pension assets are broken out (which they are in most examples). This would lead me to conclude that the operating assets (not total assets) haven't changed, and therefore why should their beta.

I understand the formulas above, it just seems like in your last one formula, the op asset beta shouldn't change from when you calc'd it before adding pension assets. Pension assets is separate when computing total asset beta. I agree that the total asset beta changes, but I think it should be because of the weight. You aren't actually adding anything different to op assets other than their effect on total asset beta. Those same assets' beta doesn't magically change. Its effect does though.

Does that even make sense?