Showing papers on "Financial risk published in 1973"

Corporate financial strategies and market measures of risk and return

Abstract: where ri, represents the total return of a company's security; ai measures the return arising from specific company effects; R1I represents the return of a broadly based pool of assets characteristic of general business, and 1int is a random variable with zero mean and zero intertemporal and intercompany covariance. When the assumptions of the capital asset pricing model are fulfilled a company's risk premium, i.e. its expected return less the pure rate of interest, is proportional to the risk premium of the market as a whole. P is the factor of proportionality for it can be shown that:2