Publication detail

Measuring Risk Structure Using the Capital Asset Pricing Model

KONEČNÝ, Z. ZINECKER, M.

Original Title

Measuring Risk Structure Using the Capital Asset Pricing Model

Type

journal article in Scopus

Language

English

Original Abstract

This article is aimed at proposing of an inovative method for calculating the shares of operational and financial risks. This methodological tool will support managers while monitoring the risk structure. The method is based on the capital asset pricing model (CAPM) for calculation of equity cost, namely on determination of the beta coefficient, which is the only variable, that is dependent on entrepreneurial risk. There are combined both alternative approaches for calculation betas, which means, that there are accounting data used and there is distinguished unlevered beta and levered beta. The novelty of the proposed method is based on including of quantities for measuring operational and financial risks in beta calculation. The volatility of cash flow, as a quantity for measuring of operational risk, is included in the unlevered beta. Return on equity based on the cash flow and the indebtedness are variables used in calculation of the levered beta. This modification makes it possible to calculate the share of operational risk as the proportion of the unlevered/levered beta and the share of financial risk, which is the remainder of levered beta. The modified method is applied on companies from two sectors of the Czech economy. In the data set there are companies from one cyclical sector and from one neutral sector to find out potential differences in the risk structure. The findings show, that in both sectors the share of operational risk is over 50 %, however, in the neutral sector is this more dominant.

Keywords

Beta Coefficient, Capital Asset Pricing Model, Financial Risk, Operational Risk, Risk Structure

Authors

KONEČNÝ, Z.; ZINECKER, M.

RIV year

2015

Released

3. 3. 2015

Publisher

Mendel University in Brno

Location

Brno

ISBN

1211-8516

Periodical

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis

Year of study

63

Number

1

State

Czech Republic

Pages from

227

Pages to

233

Pages count

7

URL

https://acta.mendelu.cz/63/1/0227/

Full text in the Digital Library

http://hdl.handle.net/11012/70186

BibTex

@article{BUT113181,
  author="Zdeněk {Konečný} and Marek {Zinecker}",
  title="Measuring Risk Structure Using the Capital Asset Pricing Model",
  journal="Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis",
  year="2015",
  volume="63",
  number="1",
  pages="227--233",
  doi="10.11118/actaun201563010227",
  issn="1211-8516",
  url="https://acta.mendelu.cz/63/1/0227/"
}