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An accounting analysis of the risk‐return relationship in bull and bear markets
Author(s) -
Kim Moon K.,
Ismail Badr E.
Publication year - 1998
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(99)80152-9
Subject(s) - downside risk , cash flow , financial economics , economics , portfolio , accrual , accounting information system , risk–return spectrum , earnings , business , monetary economics , accounting
Abstract This study provides evidence that accounting beta (earnings and cash flow‐based) provides information consistent with the risk‐return relationship in up‐ and down‐markets. We are not able, however, to provide similar evidence using market beta. Considering that investors' ability to assess the risk‐return trade‐off in up‐ and down‐markets is central to efficient portfolio formation, the results suggest that accounting data can provide appropriate measures of portfolio upside and downside risk.