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Systematic Risk and Revenue Volatility

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  • Harry F. Griffin
  • Michael T. Dugan
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    Abstract

    We introduce the degree of economic leverage (DEL) as an extension of the existing method of decomposing beta and assess its incremental explanatory power through empirical testing. The DEL is defined as the percentage change in the firm's sales resulting from a unit percentage change attributable to an exogenous economic disturbance. The exogenous economic disturbance employed is the ratio of long-term T-bond rates to short-term T-bill rates. The evidence supports the DEL's role in explaining systematic risk at both the industry and portfolio levels. However, we find mixed results at the firm level. 2003 The Southern Finance Association and the Southwestern Finance Association.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 26 (2003)
    Issue (Month): 2 ()
    Pages: 179-189

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    Handle: RePEc:bla:jfnres:v:26:y:2003:i:2:p:179-189

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    Cited by:
    1. Christian Calmès & Raymond Théoret, 2012. "The procyclicality of Basel III leverage: Elasticity-based indicators and the Kalman filter," RePAd Working Paper Series, Département des sciences administratives, UQO UQO-DSA-wp012012, Département des sciences administratives, UQO.
    2. Robert E. Houmes & John B. MacArthur & Harriet Stranahan, 2012. "The operating leverage impact on systematic risk within a context of choice: An analysis of the US trucking industry," Managerial Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 38(12), pages 1184-1202.
    3. Tobias Schlueter & Soenke Sievers, 2014. "Determinants of market beta: the impacts of firm-specific accounting figures and market conditions," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 42(3), pages 535-570, April.
    4. Calmès, Christian & Théoret, Raymond, 2013. "Market-oriented banking, financial stability and macro-prudential indicators of leverage," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 27(C), pages 13-34.

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