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A re-examination of stock-market risk Gardiner, Daniel Francis
Abstract
The purpose of the research undertaken in this thesis is twofold: a) to test the relationship between a security analyst's perception of risk based upon financial statement data and overall market return and b) to determine the relationship between the practitioners concept of risk and risk as outlined in the literature. The main data sources for the thesis were the Financial Post computer tape from which "accounting" measures of risk were derived and stock exchange price quotations from which "economic" or "traditional" risk measures were determined. "Accounting" measures of risk considered included the coefficient of variation, standard deviation and mean-absolute deviation of the earnings stream variables, net operating income, net income and net income plus depreciation. The "traditional" or "economic" measures computed were the standard deviation of return and the beta coefficient or volatility index. Arguments were then presented for the relevance of each measure in describing stock market risk. To determine any relationship among various risk measures, a correlation and sectoral analysis was undertaken. The correlation analysis indicated a significant relationship existed among certain "accounting" and "economic" risk measures and in general, this relationship was supported by the sectoral analyses. To indicate the relationship among the risk measures and overall return, a graphical analysis was undertaken. Mixed results were obtained in this analysis, with certain measures of risk displaying a more significant risk/return relationship than did others. Thus, it appears that there does exist some degree of association between "accounting" and "traditional" measures of risk as indicated by the analyses undertaken in this thesis. What the literature is measuring as risk could possibly then be a reflection of what the security analyst views as stock market risk. However, there may be other factors which play an important role in the practitioners formation of risk estimates, factors which are, as of yet, non-quantifiable.
Item Metadata
Title |
A re-examination of stock-market risk
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Creator | |
Publisher |
University of British Columbia
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Date Issued |
1972
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Description |
The purpose of the research undertaken in this thesis is twofold: a) to test the relationship between a security analyst's perception of risk based upon financial statement data and overall market return and b) to determine the relationship between the practitioners concept of risk and risk as outlined in the literature. The main data sources for the thesis were the Financial Post computer tape from which "accounting" measures of risk were derived and stock exchange price quotations from which "economic" or "traditional" risk measures were determined. "Accounting" measures of risk considered included the coefficient of variation, standard deviation and mean-absolute deviation of the earnings stream variables, net operating income, net income and net income plus depreciation. The "traditional" or "economic" measures computed were the standard deviation of return and the beta coefficient or volatility index. Arguments were then presented for the relevance of each measure in describing stock market risk.
To determine any relationship among various risk measures, a correlation and sectoral analysis was undertaken. The correlation analysis indicated a significant relationship existed among certain "accounting" and "economic" risk measures and in general, this relationship was supported by the sectoral analyses.
To indicate the relationship among the risk measures and overall return, a graphical analysis was undertaken. Mixed results were obtained in this analysis, with certain measures of risk displaying a more significant risk/return relationship than did others.
Thus, it appears that there does exist some degree of association between "accounting" and "traditional" measures of risk as indicated by the analyses undertaken in this thesis. What the literature is measuring as risk could possibly then be a reflection of what the security analyst views as stock market risk. However, there may be other factors which play an important role in the practitioners formation of risk estimates, factors which are, as of yet, non-quantifiable.
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Type | |
Language |
eng
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Date Available |
2011-03-14
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Provider |
Vancouver : University of British Columbia Library
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Rights |
For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.
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DOI |
10.14288/1.0101188
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Affiliation | |
Degree Grantor |
University of British Columbia
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Campus | |
Scholarly Level |
Graduate
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Aggregated Source Repository |
DSpace
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Rights
For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.