Discussion

The number of empirical studies aimed at examination of the relationship between risk and return to securities portfolios has increased dramatically over the last five years. There are basically two features of Nancy Jacob's paper, “The Measurement of Systematic Risk for Securities and Portfolios: Some Empirical Results,†that I feel contribute significantly to this area of study. First, the empirical analysis is based on an axiomatic system of characterizing the securities investment decision; this departs substantially from the assumptions underlying the more familiar mean-variance approach. A comparison of the conclusions reached while empirically investigating different axiomatic systems of investor behavior may play an important role in the validation of positive models of capital markets. The second contribution stems from the depth of the study as it relates to the effects of changes in the observation interval, the horizon time, and the portfolio selection procedures. Determining the appropriate horizon time and observation interval is always a major problem, when working with historical price and dividend data. The author's grouping of data into one-, five-, and ten-year horizon periods - along with varying the observation interval over monthly, quarterly, and annual data - illuminates many of the problems associated with empirical studies using a fixed holding period and observation interval.