Subjective Risk and Return

Jensen, Theis Ingerslev

doi:10.2139/ssrn.4276760

Cited by 1 publication

(2 citation statements)

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“…Following a somewhat different line of research, Jensen (2022) examines the relationship between subjective risk and investors’ return expectations and realised returns. Jensen finds different premia depending on whether the dependent variable is required return (high premia) or realised return (low premia).…”

Section: Introductionmentioning

confidence: 99%

“…The author concludes that investors suffer from over‐optimism when estimating the cash flows of riskier companies, which leads them to overestimate the required return of these types of stocks and to engage in mispricing. Jensen (2022) looks at the behaviour of traditional models and asset pricing models and restates the idea of factors related to the behaviour of securities in terms of risk. In multifactor models, these factors are size, profitability, and the existence of solvency problems.…”

Section: Introductionmentioning

confidence: 99%

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Risk analysis of Spanish companies

Rodríguez‐Sanz,

Vallelado,

Fernández‐Martín

2024

Global Policy

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This paper aims to investigate the determinants of different types of market risk faced by Spanish firms from 2012 to 2019. Using Fama and French's (Journal of Financial Economics, 1993, 33, 3) three‐factor model, we estimate total risk, diversifiable risk, and systematic or non‐diversifiable risk in the three dimensions proposed by these authors: market risk, size risk, and valuation risk. Risk determinants are derived from a series of economic and financial variables obtained from the information contained in financial statements. This information is summarised using a factor analysis that aims to resolve the correlation issues between the proposed measures. The study demonstrates that the systematic risk factors proposed by Fama and French in their 1993 three‐factor model incorporate dimensions of systematic risk that are relevant to investors and that the set of economic and financial variables proposed can explain these risks. Among these variables, profitability and the market to book ratio have the greatest impact in explaining company risk, while factors such as operating and financial leverage, growth, or company insolvency have a much smaller effect as explanatory factors for risk.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%