Download or read book The Risk return Relation at the Firm and Industry Level written by Marc Jegers and published by . This book was released on 1987 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Strategy Paradox written by Michael E. Raynor and published by Crown Currency. This book was released on 2007-02-20 with total page 322 pages. Available in PDF, EPUB and Kindle. Book excerpt: A compelling vision. Bold leadership. Decisive action. Unfortunately, these prerequisites of success are almost always the ingredients of failure, too. In fact, most managers seeking to maximize their chances for glory are often unwittingly setting themselves up for ruin. The sad truth is that most companies have left their futures almost entirely to chance, and don’t even realize it. The reason? Managers feel they must make choices with far-reaching consequences today, but must base those choices on assumptions about a future they cannot predict. It is this collision between commitment and uncertainty that creates THE STRATEGY PARADOX. This paradox sets up a ubiquitous but little-understood tradeoff. Because managers feel they must base their strategies on assumptions about an unknown future, the more ambitious of them hope their guesses will be right – or that they can somehow adapt to the turbulence that will arise. In fact, only a small number of lucky daredevils prosper, while many more unfortunate, but no less capable managers find themselves at the helms of sinking ships. Realizing this, even if only intuitively, most managers shy away from the bold commitments that success seems to demand, choosing instead timid, unremarkable strategies, sacrificing any chance at greatness for a better chance at mere survival. Michael E. Raynor, coauthor of the bestselling The Innovator's Solution, explains how leaders can break this tradeoff and achieve results historically reserved for the fortunate few even as they reduce the risks they must accept in the pursuit of success. In the cutthroat world of competitive strategy, this is as close as you can come to getting something for nothing. Drawing on leading-edge scholarship and extensive original research, Raynor’s revolutionary principle of Requisite Uncertainty yields a clutch of critical, counter-intuitive findings. Among them: -- The Board should not evaluate the CEO based on the company’s performance, but instead on the firm’s strategic risk profile -- The CEO should not drive results, but manage uncertainty -- Business unit leaders should not focus on execution, but on making strategic choices -- Line managers should not worry about strategic risk, but devote themselves to delivering on commitments With detailed case studies of success and failure at Sony, Microsoft, Vivendi Universal, Johnson & Johnson, AT&T and other major companies in industries from financial services to energy, Raynor presents a concrete framework for strategic action that allows companies to seize today’s opportunities while simultaneously preparing for tomorrow’s promise.

Download or read book Is There a Risk and Return Relation written by Suzanne G.M. Fifield and published by . This book was released on 2017 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional finance theory posits that the relationship between the risk and return of stocks is positive. Furthermore, investment practice is often based on the central contention of the Capital Asset Pricing Model (CAPM) that high (low) beta stocks earn higher (lower) returns. However, this fundamental return and risk relationship is questioned by a several researchers who assert that the relationship is, in fact, negative. Consequently, a growing body of research examines the nature of the stock return-risk relationship using both market- and firm-level data. The results of this research are mixed. The purpose of this paper is to shed further light on this relationship by (i) examining both market- and firm-level price data; (ii) employing a battery of tests, including individual market, panel and quantile regressions; and (iii) analysing the nature of the relationship during periods of high and low volatility and in bull and bear markets. The results indicate that there is no single robust relationship between risk and return. Of note, our results suggest a positive relationship when returns are high and during bear markets. Furthermore, the finding of a positive relationship is stronger (i) at the market-level than the firm-level; and (ii) over long time periods. However, the analysis indicates that a negative relationship exists at low return levels, during bull markets and, more so, at the individual firm level. Overall, the results suggest that the risk-return relationship is switching in nature and is primarily driven by changing risk preferences. Notably, a positive relationship exists when macroeconomic risk plays a larger role.

Download or read book An Introduction to Risk and Return from Common Stocks written by Richard A. Brealey and published by MIT Press (MA). This book was released on 1969 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Innovation and Idiosyncratic Risk written by Mariana Mazzucato and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent studies find that idiosyncratic risk (IR) the degree to which firm-specific returns are more volatile than aggregate market returns has increased since the 1960s and attribute this to economy-wide factors such as the role of the IT revolution. Yet no innovation data is used in these studies. To gain further insights into the relationship between technology and IR, our aricle studies whether firms and industries that are more Ramp;D intensive are in fact characterized by higher IR due to how innovation affects the uncertainty of expected future profits. While the industry-level results prove inconclusive, a clear relationship is found between firm-level Ramp;D intensity and firm-level volatility of returns.

Download or read book Effects of Culture on Firm Risk Taking written by MissRoxana Mihet and published by International Monetary Fund. This book was released on 2012-08-01 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the effects of national culture on firm risk-taking, using a comprehensive dataset covering 50,000 firms in 400 industries in 51 countries. Risk-taking is found to be higher for domestic firms in countries with low uncertainty aversion, low tolerance for hierarchical relationships, and high individualism. Domestic firms in such countries tend to take substantially more risk in industries which are more informationally opaque (e.g. finance, mining, IT). Risk-taking by foreign firms is best explained by the cultural norms of their country of origin. These cultural norms do not proxy for legal constraints, insurance safety nets, or economic development.

Download or read book Risk Uncertainty and Profit written by Frank H. Knight and published by Cosimo, Inc.. This book was released on 2006-11-01 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: A timeless classic of economic theory that remains fascinating and pertinent today, this is Frank Knight's famous explanation of why perfect competition cannot eliminate profits, the important differences between "risk" and "uncertainty," and the vital role of the entrepreneur in profitmaking. Based on Knight's PhD dissertation, this 1921 work, balancing theory with fact to come to stunning insights, is a distinct pleasure to read. FRANK H. KNIGHT (1885-1972) is considered by some the greatest American scholar of economics of the 20th century. An economics professor at the University of Chicago from 1927 until 1955, he was one of the founders of the Chicago school of economics, which influenced Milton Friedman and George Stigler.

Download or read book Geopolitical Risk on Stock Returns Evidence from Inter Korea Geopolitics written by Seungho Jung and published by International Monetary Fund. This book was released on 2021-10-22 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.

Download or read book What is the Shape of the Risk Return Relation written by Alberto G. P. Rossi and published by . This book was released on 2010 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a flexible econometric approach that avoids imposing restrictive modeling assumptions, we find evidence of a non-monotonic relation between conditional volatility and expected stock market returns: At low-to-medium levels of conditional volatility there is a positive trade-off between risk and expected returns, but this relationship gets inverted at high levels of volatility as observed during the recent financial crisis. We propose a new measure of risk based on the conditional covariance between daily observations of a broad economic activity index and stock returns. Using this covariance measure, we find clear evidence of a monotonically increasing risk-return trade-off. Our finding of a non-monotonic mean-volatility relation helps explain the absence of a consensus in the empirical literature on the sign of the risk-return trade-off. At the same time, our finding that the expected return is a monotonically rising function of the conditional covariance measure also suggests that a positive risk-return relation can be established once a better measure of risk is used.

Download or read book Risk and Return in Finance written by Irwin Friend and published by . This book was released on 1977 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Theory of the Growth of the Firm written by Edith Tilton Penrose and published by . This book was released on 2013-12 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt: 2013 Reprint of 1959 American Edition. Full facsimile of the original edition, not reproduced with Optical Recognition Software. This edition reprints the text from the 1959 First Edition originally published by Wiley. Why do some firms perform better than others? What enables a firm to grow and take advantage of its opportunities? Currently much discussion of these questions pivots around the ideas of competencies and capabilities, and the concept of the learning organization or knowledge-creating company. "The Theory of the Growth of the Firm" is a rich and pioneering work that addresses these questions and laid the foundation for this approach often referred to as the "resource based view of the firm." Edith Penrose analyzes managerial activities and decisions, organizational routines, and knowledge creation within the company and argues that they are critical to the ability of a firm to grow. This work has become a classic business book and remains relevant to this day.

Download or read book Firm Characteristics Consumption Risk and Firm Level Risk Exposures written by Robert F. Dittmar and published by . This book was released on 2015 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a novel approach to measuring firm-level risk exposures and costs of equity. Using a simple consumption-based asset pricing model that explains nearly two-thirds of the variation in average returns across 55 portfolios, we map the relation between exposures to consumption risk and portfolio-level characteristics. We use this relation to calculate exposures to consumption risk at the firm level and show that the calculated consumption risk exposures yield portfolios with large differences in average returns and ex post consumption risk exposures consistent with those predicted by our calculated betas. Further, industry betas and risk premia implied by our procedure display economically intuitive variation over time. Finally, Fama-MacBeth regressions suggest that risk exposures calculated using our procedure dominate those from alternative factor models at explaining cross-sectional variation in returns.

Download or read book Uncovering the Risk return Relation in the Stock Market written by Hui Guo and published by . This book was released on 2003 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is an ongoing debate in the literature about the apparent weak or negative relation between risk (conditional variance) and return (expected returns) in the aggregate stock market. We develop and estimate an empirical model based on the ICAPM to investigate this relation. Our primary innovation is to model and identify empirically the two components of expected returns--the risk component and the component due to the desire to hedge changes in investment opportunities. We also explicitly model the effect of shocks to expected returns on ex post returns and use implied volatility from traded options to increase estimation efficiency. As a result, the coefficient of relative risk aversion is estimated more precisely, and we find it to be positive and reasonable in magnitude. Although volatility risk is priced, as theory dictates, it contributes only a small amount to the time-variation in expected returns. Expected returns are driven primarily by the desire to hedge changes in investment opportunities. It is the omission of this hedge component that is responsible for the contradictory and counter-intuitive results in the existing literature

Download or read book The Empirical Risk return Relation written by Sydney C. Ludvigson and published by . This book was released on 2005 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: "A key criticism of the existing empirical literature on the risk-return relation relates to the relatively small amount of conditioning information used to model the conditional mean and conditional volatility of excess stock market returns. To the extent that financial market participants have information not reflected in the chosen conditioning variables, measures of conditional mean and conditional volatility--and ultimately the risk-return relation itself--will be misspecified and possibly highly misleading. We consider one remedy to these problems using the methodology of dynamic factor analysis for large datasets, whereby a large amount of economic information can be summarized by a few estimated factors. We find that three new factors, a "volatility, " "risk premium, " and "real" factor, contain important information about one-quarter ahead excess returns and volatility that is not contained in commonly used predictor variables. Moreover, the factor-augmented specifications we examine predict an unusual 16-20 percent of the one-quarter ahead variation in excess stock market returns, and exhibit remarkably stable and strongly statistically significant out-of-sample forecasting power. Finally, in contrast to several pre-existing studies that rely on a small number of conditioning variables, we find a positive conditional correlation between risk and return that is strongly statistically significant, whereas the unconditional correlation is weakly negative and statistically insignificant"--National Bureau of Economic Research web site.

Download or read book Empirical Asset Pricing written by Turan G. Bali and published by John Wiley & Sons. This book was released on 2016-02-26 with total page 512 pages. Available in PDF, EPUB and Kindle. Book excerpt: “Bali, Engle, and Murray have produced a highly accessible introduction to the techniques and evidence of modern empirical asset pricing. This book should be read and absorbed by every serious student of the field, academic and professional.” Eugene Fama, Robert R. McCormick Distinguished Service Professor of Finance, University of Chicago and 2013 Nobel Laureate in Economic Sciences “The empirical analysis of the cross-section of stock returns is a monumental achievement of half a century of finance research. Both the established facts and the methods used to discover them have subtle complexities that can mislead casual observers and novice researchers. Bali, Engle, and Murray’s clear and careful guide to these issues provides a firm foundation for future discoveries.” John Campbell, Morton L. and Carole S. Olshan Professor of Economics, Harvard University “Bali, Engle, and Murray provide clear and accessible descriptions of many of the most important empirical techniques and results in asset pricing.” Kenneth R. French, Roth Family Distinguished Professor of Finance, Tuck School of Business, Dartmouth College “This exciting new book presents a thorough review of what we know about the cross-section of stock returns. Given its comprehensive nature, systematic approach, and easy-to-understand language, the book is a valuable resource for any introductory PhD class in empirical asset pricing.” Lubos Pastor, Charles P. McQuaid Professor of Finance, University of Chicago Empirical Asset Pricing: The Cross Section of Stock Returns is a comprehensive overview of the most important findings of empirical asset pricing research. The book begins with thorough expositions of the most prevalent econometric techniques with in-depth discussions of the implementation and interpretation of results illustrated through detailed examples. The second half of the book applies these techniques to demonstrate the most salient patterns observed in stock returns. The phenomena documented form the basis for a range of investment strategies as well as the foundations of contemporary empirical asset pricing research. Empirical Asset Pricing: The Cross Section of Stock Returns also includes: Discussions on the driving forces behind the patterns observed in the stock market An extensive set of results that serve as a reference for practitioners and academics alike Numerous references to both contemporary and foundational research articles Empirical Asset Pricing: The Cross Section of Stock Returns is an ideal textbook for graduate-level courses in asset pricing and portfolio management. The book is also an indispensable reference for researchers and practitioners in finance and economics. Turan G. Bali, PhD, is the Robert Parker Chair Professor of Finance in the McDonough School of Business at Georgetown University. The recipient of the 2014 Jack Treynor prize, he is the coauthor of Mathematical Methods for Finance: Tools for Asset and Risk Management, also published by Wiley. Robert F. Engle, PhD, is the Michael Armellino Professor of Finance in the Stern School of Business at New York University. He is the 2003 Nobel Laureate in Economic Sciences, Director of the New York University Stern Volatility Institute, and co-founding President of the Society for Financial Econometrics. Scott Murray, PhD, is an Assistant Professor in the Department of Finance in the J. Mack Robinson College of Business at Georgia State University. He is the recipient of the 2014 Jack Treynor prize.

Download or read book Is There a Risk Return Tradeoff Evidence from High Frequency Data written by Turan G. Bali and published by . This book was released on 2012 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the intertemporal relation between risk and return for the aggregate stock market using high-frequency data. We use daily realized, GARCH, implied, and range-based volatility estimators to determine the existence and significance of a risk-return tradeoff for several stock market indices. We find a positive and statistically significant relation between the conditional mean and conditional volatility of market returns at the daily level. This result is robust to alternative specifications of the volatility process, across different measures of market return and sample periods, and after controlling for macroeconomic variables associated with business cycle fluctuations. We also analyze the risk-return relationship over time using rolling regressions, and find that the strong positive relation persists throughout our sample period. The market risk measures adopted in the paper add power to the analysis by incorporating valuable information, either by taking advantage of high frequency intraday data (in the case of realized, GARCH, and range volatility) or by utilizing the market's expectation of future volatility (in the case of implied volatility index).

Download or read book A Risk return Paradox written by Matthew C. Bloom and published by . This book was released on 1993 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: