The competitive strengths of a Coke or Gillette are obvious to even the casual observer of business. Yet the beta of their stocks is similar to that of a great many run-of-the-mill companies who possess little or no competitive advantage. Should we conclude from this similarity that the competitive strength of Coke and Gillette gains them nothing when business risk is being measured? Or should we conclude that the risk in owning a piece of a company—its stock—is somehow divorced from the long-term risk inherent in its business operations? We believe neither conclusion makes sense and that
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Criticising beta as a measure of risj
