Regulation Effects on Company Beta Components
This paper introduces a general model to analyze the effects of regulation on company risk. In particular, we consider two determinants of systematic risk: the company’s overall risk and the correlation between the regulated company’s value and the market. Theoretical findings indicate that as regulation gets stricter, the company’s abnormal returns will turn negative, whereas the two systematic risk components will increase, and vice versa. We use event analysis elements and a time-varying beta estimation to verify the regulation impact on risk and returns in the English electricity distribution industry. We find that systematic risk varies significantly during the period considered in our analysis. Furthermore, the analysis points to negative relationships between abnormal returns and both market correlation and overall risk variations.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.unibg.it/struttura/en_struttura.asp?cerca=en_dige_intro
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:brh:wpaper:0502. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (University of Bergamo Library)
If references are entirely missing, you can add them using this form.