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Risk and Return from Equity Investments in the Australian Mining Industry: January 1958 — February 1979

Author

Listed:
  • Ray Ball

    (AGSM)

  • Philip Brown

    (University of W.A. We wish to acknowledge the generous financial support of C.R.A. Services Limited, the assistance of the Stock Exchange of Sydney, the comments of the referees and the work of our research assistants on this project, David Firth and (especially) Jill Henry.)

Abstract

In the spirit of Fisher and Lorie (1968), the authors constructed a data base comprising monthly rates of return on 1029 separately-listed Sydney mining equities over the period January 1958 to February 1979. The data base should stimulate further research. The first use of the data is a study by the authors of historical risks and returns from equity investments in Australian mining. The value-weighted average return over the period was found to be 11.9% per year, continuously-compounded. Mining equities were considerably riskier (considered by themselves) than industrial equities and a surprisingly large amount of their risk did not appear to be diversifiable. There was little correlation between size (measured by market capitalization) and subsequent rate of return, though size and standard deviation of rate of return were significantly negatively correlated. The seemingly unfavourable risk/return comparison for mining is anomalous and requires further investigation.

Suggested Citation

  • Ray Ball & Philip Brown, 1980. "Risk and Return from Equity Investments in the Australian Mining Industry: January 1958 — February 1979," Australian Journal of Management, Australian School of Business, vol. 5(1-2), pages 45-66, April.
    • Handle: RePEc:sae:ausman:v:5:y:1980:i:1-2:p:45-66
    DOI: 10.1177/031289628000500203
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    References listed on IDEAS

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    1. Lawrence Fisher & James H. Lorie, 1968. "Rates of Return on Investments in Common Stock: The Year-by-Year Record, 1926-65," The Journal of Business, University of Chicago Press, vol. 41, pages 291-291.
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    Cited by:

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    3. Brailsford, Timothy J. & Faff, Robert W., 1996. "An evaluation of volatility forecasting techniques," Journal of Banking & Finance, Elsevier, vol. 20(3), pages 419-438, April.
    4. William L. Beedles, 1986. "Asymmetry in Australian Equity Returns," Australian Journal of Management, Australian School of Business, vol. 11(1), pages 1-12, June.
    5. Nguyen, Hoa & Faff, Robert, 2003. "Can the use of foreign currency derivatives explain variations in foreign exchange exposure?: Evidence from Australian companies," Journal of Multinational Financial Management, Elsevier, vol. 13(3), pages 193-215, July.
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    8. Robert Faff & Howard Chan, 1998. "A multifactor model of gold industry stock returns: evidence from the Australian equity market," Applied Financial Economics, Taylor & Francis Journals, vol. 8(1), pages 21-28.
    9. Saqib Muneer & Babar Zaheer Butt & Kashif Ur Rehman, 2011. "A Multifactor Model of Banking Industry Stock Returns: An Emerging Market Perspective," Information Management and Business Review, AMH International, vol. 2(6), pages 267-275.
    10. Lazzarino, Marco & Berrill, Jenny & Šević, Aleksandar, 2022. "The importance of distinguishing between precious and industrial metals when investing in mining stocks," Resources Policy, Elsevier, vol. 78(C).
    11. Juan Yao & Jiti Gao, 2004. "Computer-Intensive Time-Varying Model Approach to the Systematic Risk of Australian Industrial Stock Returns," Australian Journal of Management, Australian School of Business, vol. 29(1), pages 121-145, June.
    12. Ray Ball & John Bowers, 1986. "Shares, Bonds, Treasury Notes, Property Trusts and Inflation: Historical Returns and Risks, 1974-1985," Australian Journal of Management, Australian School of Business, vol. 11(2), pages 117-137, December.
    13. Islam, Silvia Z. & Khandaker, Sarod, 2015. "Firm leverage decisions: Does industry matter?," The North American Journal of Economics and Finance, Elsevier, vol. 31(C), pages 94-107.
    14. Ferguson, Andrew & Feigin, Alexey & Kean, Stephen, 2013. "Gold mine feasibility study disclosure in Australia: Determinants and implications," Resources Policy, Elsevier, vol. 38(1), pages 8-17.
    15. Sanam Khan & Faisal Jamil, 2021. "Income differentials in the police and taxation departments’ employees in Peshawar," Quality & Quantity: International Journal of Methodology, Springer, vol. 55(5), pages 1815-1828, October.
    16. Robert D. Brooks & Robert W. Faff & Michael D. McKenzie, 1998. "Time†Varying Beta Risk of Australian Industry Portfolios: A Comparison of Modelling Techniques," Australian Journal of Management, Australian School of Business, vol. 23(1), pages 1-22, June.
    17. Brailsford, Timothy J., 1995. "Market closures and time-varying volatility in the Australian equity market," Journal of Empirical Finance, Elsevier, vol. 2(2), pages 165-172, June.
    18. Balachandran, Balasingham & Faff, Robert & Tanner, Sally, 2004. "Further evidence on the announcement effect of bonus shares in an imputation tax setting," Global Finance Journal, Elsevier, vol. 15(2), pages 147-170, August.
    19. Ron Bird & Matthew Grosse & Danny Yeung, 2013. "The market response to exploration, resource and reserve announcements by mining companies: Australian data," Australian Journal of Management, Australian School of Business, vol. 38(2), pages 311-331, August.
    20. Andrew Ferguson & Matthew Grosse & Stephen Kean & Tom Scott, 2011. "Your Governance or Mine?," Australian Accounting Review, CPA Australia, vol. 21(4), pages 406-417, December.
    21. Frank Finn & Timo Koivurinne, 2000. "The Ex Ante Efficiency of Australian Stock Market Benchmarks," Australian Journal of Management, Australian School of Business, vol. 25(1), pages 1-16, June.
    22. Di Iorio, Amalia & Faff, Robert, 2002. "The pricing of foreign exchange risk in the Australian equities market," Pacific-Basin Finance Journal, Elsevier, vol. 10(1), pages 77-95, January.
    23. Robert Faff & David Hillier & Justin Wood, 2000. "Beta and Return: Implications of Australia's Dividend Imputation Tax System," Australian Journal of Management, Australian School of Business, vol. 25(3), pages 245-260, December.
    24. Tri Wahyu Adi, 2022. "The International Gas and Crude Oil Price Variability Effect on Indonesian Coal Mining Companies Listed at IDX," International Journal of Energy Economics and Policy, Econjournals, vol. 12(5), pages 1-10, September.

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