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How Risky Are Sif'S Securities?

Author

Listed:
  • Claudiu Botoc

    (West University of Timisoara, Faculty of Economics and Business Administration)

Abstract

The capital asset pricing model (CAPM) lies at the heart of models in financial economics and it has a long history of theoretical and empirical investigations. The beta (ß) of the stock is a measure of how much specific risk remains in the stock after all possible risks are diversified. The specific risk of an individual stock is the slope coefficient of the regression between the return for the individual security and the return for the market index. The main aim of the paper is to measure the systematic risk for a given number of stocks from the Romanian capital market in order to determine if these stocks are riskier than the market itself. The focus is on market risk and not on the company-specific risk and the hypotheses tested states that "stock market prices are mainly set based on the trading activity of the investors". Using data for the period 2001-2014, the results suggest that all SIF's were bearing a higher risk than the market itself, with an increasing level for the sub-period 2008-2014 (post crisis). Since SIF's are earning a high return too, these results are consistent with risk-return trade-off. The results remain robust even when was used monthly return instead of daily return.

Suggested Citation

  • Claudiu Botoc, 2014. "How Risky Are Sif'S Securities?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 845-850, July.
    • Handle: RePEc:ora:journl:v:1:y:2014:i:1:p:845-850
    as

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    File URL: http://anale.steconomiceuoradea.ro/volume/2014/n1/092.pdf
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    References listed on IDEAS

    as
    1. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. Andrew J. Patton & Michela Verardo, 2012. "Does Beta Move with News? Firm-Specific Information Flows and Learning about Profitability," The Review of Financial Studies, Society for Financial Studies, vol. 25(9), pages 2789-2839.
    3. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    4. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    5. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-636, May-June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    CAPM; beta; stock; risk; return;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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