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The beta coefficient used for the cost of equity calculation is at the heart of the valuation process. This study conducts comparative analyses of the classical capital asset pricing model (CAPM) and downside CAPM risk parameters to gain further insight into which risk parameter leads to better performing risk measures at explaining stock returns.

The study conducts a comparative analysis of 16 risk measures at explaining the stock returns of 4531 companies of 20 developed and 25 emerging market index for 2000–2018. The analyses are conducted using both the global and local indices and both USD and local currency returns. Calculated risk measures are analyzed in a panel data setup using a univariate model. Results are investigated in country-specific and model-specific subsets.

The results show that (1) downside betas are better than CAPM betas at explaining the stock returns, (2) both risk measure groups perform better for emerging markets, (3) global downside beta model performs better than global beta model, implying the existence of the contagion effect, (4) high significance levels of total risk and unsystematic risk measures further support the shortfall of CAPM betas and (5) higher correlation of markets after negative shocks such as pandemics puts global CAPM based downside beta to a more reliable position.

The data are limited to the index securities as beta could be time varying.

Results overall provide insight into the cost of equity calculation and emerging market assets valuation.

The framework and methodology enable us to compare and contrast CAPM and downside-CAPM risk measures at the firm level, at the global/local level and in terms of the level of market development.

This paper aims to undertake a comprehensive comparative analysis of Sharīʿah-compliant equity investments (SCEIs) and their non-Sharīʿah counterparts, in India, conditioning for investment horizon and market volatility. Indirectly, it also investigates for time varying performance of SCEIs, and explicitly analyses the unsystematic risk and related adequacy of returns.

Testing for statistical significance of differences in risks and returns; analysing portfolio performance using conventional metrics, information ratio, and Jensen's Alpha; Estimating returns due to stock selection and market timing using Fama’s Net Selectivity and Treynor and Mazuy’s Models.

SCEIs in India do not significantly differ in their total risks and returns compared to their conventional counterparts. While their risk is lower in the monthly and quarterly investment horizons, their Jensen’s Alphas are positive only in the annual investment horizons. These findings hold, when market volatility is low. Market timing wipes out the superior returns that exist due to stock selection in SCEIs.

Being Sharīʿah-compliant is beneficial only in longer investment horizons. Asset selection, not co-movement with the market, is key to excess returns to compensate for risks due to inadequate diversification. However, only cautious market timing can conserve them.

Though investors are not better-off in choosing ethical investments, they are not worse-off either. Being Sharīʿah-compliant is rewarding during less volatile markets.

This paper extends international literature on SCEIs, with evidence on the impact of investment horizon and market volatility on their returns and risks. Further, this paper is also a comprehensive analysis of Indian SCEIs, broadening the empirical evidence on a significant, non-Islamic and emerging market.

The average U.S. farm size has risen dramatically over the last three decades. Motives for this trend are the subject of a large body of literature. This study incorporates farm size risk and return analysis into this research stream. In this paper, cross-sectional and temporal relations between farm size and returns are examined and characterized.

Relying on farm level panel data from Kansas Farm Management Association (KFMA) for 140 farms from 1996 to 2018, this article examines the relationship between farm size and returns and investigates whether farm size is related to risk. Two measures of farm returns are used: excess return on equity and risk-adjusted return on equity. Value of farm production and total farm acres are used as measures of farm size.

Findings suggest a significant and positive relationship between farm size and excess return on equity as well as farm size and risk-adjusted return on equity. However, this return premium associated with farm size is not associated with additional risk. Stated differently, farm size can be viewed as a farm characteristic that is associated with higher return without additional risk.

These findings provide further support for ongoing farm consolidation.

The results suggest the trend towards consolidation in production agriculture is likely to continue. Larger farms bear less risk.

Many studies have shown that from a theoretical and empirical point of view, downside risk-based measures of risk are better than the traditional ones. Despite academic appeal and practical implications, downside risk has not been thoroughly examined in markets outside developed country markets. Using downside beta as a measure of downside risk, this study examines the relationship between downside beta and stock returns in Indian equity market, an emerging market with unique investor, asset and market characteristics.

This is an empirical study done by using ranked portfolio return analysis and regression analysis methodologies.

The study results show that downside risk, as measured by downside beta, is distinctly priced in the Indian equity market. There is a direct positive relationship between downside beta and contemporaneous realized returns, indicating a premium for downside risk. Downside risk carries a higher weightage than upside potential in the aggregate return of the stock portfolios. Downside beta is a better measure of systematic risk than conventional market beta and downside coskewness.

The empirical results support the adoption of downside beta in practice and provide a case for replacing traditional beta with downside beta in asset pricing applications, trading and investment strategies, and capital allocation decision-making.

This is one of the first in-depth studies examining downside beta in Indian equity markets using a broad sample of individual stock returns covering a wide time range of 22 years. To the best of our knowledge, this study is the first one to compare downside beta and downside coskewness using individual stock data from the Indian equity market.

This study aims to examine the performance of environmental, social and governance (ESG) equity indices in Latin America (LA), evaluating their risk-return characteristics in comparison to conventional benchmark indices.

Using a quantitative empirical approach, the authors analyze ESG equity indices from Brazil, Mexico, Chile, Peru and Colombia, employing metrics such as Sharpe, Sortino and Omega ratios to measure risk-adjusted returns. Regression analysis is employed to assess the replicability of ESG indices by benchmark indices. Monte Carlo simulations are conducted to explore the potential increase in risk-adjusted returns when ESG equity indices are incorporated into portfolios.

The study addresses critical questions for investors: Can ESG indices outperform their benchmarks? Can these ESG indices be replicated by benchmark counterparts? Do ESG equity indices enhance portfolio diversification? The findings reveal that investing in ESG indices has the potential to enhance risk-adjusted returns and portfolio diversification.

While this study focuses on various LA economies, it’s important to note variations in currency and volatility.

For investors in LA, this study highlights the importance of considering ESG indices as part of their investment strategies. While not all ESG indices outperform conventional ones, some may improve diversification and risk-adjusted performance. Investors should carefully assess market-specific conditions and national factors when making investment decisions.

The primary contribution of this study is its focus on LA countries in the examination of diverse portfolios. The research provides valuable insights into the performance of ESG indices in this region compared to conventional benchmark indices. This approach addresses an important gap in the existing literature and offers a more comprehensive perspective on ESG investing and portfolio diversification.

Se examina el rendimiento de los índices-ESG en América Latina (AL), evaluando sus características de riesgo y retorno en comparación con los índices convencionales.

Utilizando un enfoque cuantitativo, analizamos los índices-ESG de Brasil, México, Chile, Perú y Colombia, empleando ratios de Sharpe, Sortino y Omega para medir los rendimientos ajustados al riesgo. Se utiliza análisis de regresión para evaluar la replicabilidad de los índices-ESG por parte de los índices de referencia. Se realizan simulaciones de Monte-Carlo para explorar el aumento en los rendimientos ajustados al riesgo cuando se incorporan los índices-ESG en las carteras.

El estudio aborda preguntas críticas: ¿Pueden los índices-ESG superar a sus índices de referencia? ¿Pueden estos índices-ESG ser replicados por sus contrapartes de referencia? ¿Mejoran los índices-ESG la diversificación de las carteras? Los hallazgos revelan que la inversión en índices-ESG tiene el potential de mejorar los rendimientos y la diversificación de las carteras de inversión.

Aunque este estudio se centra en diversas economías de AL, es importante tener en cuenta variaciones en moneda y volatilidad.

La principal contribución de este estudio radica en su enfoque en países de AL en el examen de carteras diversas; ofrece valiosos conocimientos sobre el rendimiento de los índices-ESG en esta región en comparación con los índices convencionales.

The study examines the impact of risk on the profit efficiency and profitability of banks in Ghana.

Data envelopment analysis was used to estimate profit efficiency scores and accounting ratios were used to measure profitability. The panel corrected standard error regression was used to assess the nexus using a dataset of 32 banks from 2000 to 2015.

The paper found that the Ghanaian banking industry exhibits a variable return to scale property, suggesting that average costs change with output size. Profit efficiency score for banks closer to the efficiency frontier is 61%. Credit risk is significant in enhancing profit efficiency and return on equity. Market risk is relevant in improving profit efficiency, return on asset and asset turnover. To drive profitability, bank managers have to be committed to effective liquidity risk, insolvency risk and capital risk management. Operational risk reduces shareholders' returns. The impact of size, age, stock exchange listing, cost efficiency and competition have are all been discussed extensively.

The findings contribute to the knowledge on the risk-performance nexus and provide information that is valuable to academics, bankers and regulators for policy formulation. The findings are relevant to the newly established Financial Stability Council.

This paper appears to be among the premier attempts to examine the effect of various risk types identified in the Basel III framework on bank performance in Africa.

This paper aims to examine the performance of Islamic and conventional stocks listed at the Pakistan Stock Exchange by using both parametric and non-parametric approaches. The motivation is to do risk-return analysis of Islamic stock prices and conventional stock prices.

It uses various measures of performance, e.g. Sharpe ratio, Treynor ratio, Jensen's alpha, beta, generalized auto-regressive conditional heteroskedasticity and stochastic dominance. Using the Karachi Meezan Index-30 (KMI-30) and the Karachi Stock Exchange Index-30 (KSE-30) as proxies for Islamic and conventional stock prices, respectively, it examines the performance of Islamic and conventional stocks. The daily data of KMI-30 and KSE-30, covering period from June 9, 2009 to June 20, 2020 are used.

The results show that the overall KMI-30 outperforms the KSE-30. The returns of the KMI-30 are greater than the KSE-30. However, the risk and volatility of the KMI-30 and KSE-30 are similar. Further, the KMI-30 has higher excess returns per unit of total risk than the KSE-30. But both indexes have similar excess returns per unit of systematic risk. Moreover, the KMI-30 returns have stochastically dominance over the KSE-30 returns. These results reveal that the Islamic index performs better than the conventional index.

The findings provide several practical implications in financial and investment decisions making by investors, managers and policymakers such as strategies for asset allocation and investment. Further, in risk management, it provides guidance for allocating portfolios and managing risk. The investment in Islamic stocks may mitigate potential risk within asset portfolios.

This research is unique in its approach to the analysis of the performance comparison of conventional and Islamic stock by using comprehensive parametric and non-parametric estimation techniques. Such research has not been undertaken in the Pakistan's equity market since.

In real estate industry, managers' choices in portfolio construction impact directly on the performance of real estate fund. Looking at the literature, real estate diversification criteria are related to tenants' characteristics, to endogenous and exogenous risk and to financial choices. The aim of the paper is to study the role of different risk profiles in the investment selection and in the construction of an efficient real estate portfolio.

The first step is to find out an investment selection model based on the main risk factors. The aim was to check the ability of qualitative criteria (tenant, exogenous, endogenous and financial risks) to identify ex ante the best investment opportunities. The observation of the portfolios' composition on the efficient frontier and the proximity of individual property to the efficient frontier point out which risk factors are more important. The second step is to define a model to construct a portfolio, with non correlated investments, based on the main risk factors. This ability was tested by comparing the classifications made according to quality criteria, which can potentially be used ex ante to construct a diversified portfolio, with the results of cluster analysis. The results from the cluster analysis, free from quality profiles, are therefore considered as the best diversification strategy.

The results stemming from the use of a real estate database supplied by Fimit SGR (Unicredit banking group) showed that an ex ante study of risk profiles can help to identify those investment opportunities which are more or less near to the efficient frontier, although there is no prevailing criterion to identify a portfolio able to maximise investment diversification benefits. To identify more efficient portfolio is necessary to define an evaluation approach that considers simultaneously different risk profiles of real estate investments.

The paper considers the Italian market, a young market for institutional real estate investments characterised by high growing opportunities. The value added of the paper is to study the relationship of different real estate specific risks considered in literature (tenant risk, endogenous and exogenous risk) and financing choices in order to define a more complete model to evaluate real estate portfolios.

This paper aims to analyse the risk and excess returns of the Spanish real estate investment trusts (S-REITs) using various methods, though focusing primarily on the Fama-French three-factor (FF3) model, over the period from 2007Q3 to 2017Q2.

The autoregressive distributed lag model is used for the empirical analysis to test long-term stable relationships between variables.

The findings indicate that the FF3 model is suitable for the S-REITs market, better explaining the S-REITs’ returns variation than the traditional single-index capital asset pricing model (CAPM) and the Carhart four-factor model. The empirical evidence is reasonably consistent with the FF3 model; the values for the market, size and value are highly statistically significant over the analysis period, with 68.7% variation in S-REITs’ returns explained by the model. In the long run, the market factor has less explanatory power than the size and value factors; the positive long-term multiplier of the size factor indicates that small S-REIT companies have higher returns, along with higher risk, while the negative multiplier of the value indicator suggests that S-REITs portfolios prefer to allocate growth REITs with low book-to-market ratios. The empirical findings from a modified FF3 model, which additionally incorporates Spain’s gross domestic product (GDP) growth rate, two consumer price index (CPI) macro-factors and three dummy variables, indicates that GDP growth rate and CPI also affect S-REITs’ yields, while investment funds with capital calls have a small influence on S-REITs’ returns.

The regression results of the standard and extended FF3 model can help researchers understand S-REITs’ risk and return through a general stock pattern. Potential investors are given more information to consider the new Spanish investment vehicle before making a decision.

The paper uses standard techniques but applies them for the first time to the S-REIT market.

Until recently little attention has been given in Accounting and Finance literature to the problem of linking the results of financial evaluation techniques such as Net Present Value (NPV) and Shareholder Value Analysis (SVA) to managers’ cognitive evaluation of strategic factors and the risk profile of projects. Various authors have called for research in this area, but very little has so far been published. This paper reports on a field‐based study carried out in the logistics industry. It builds on earlier research, which elicited constructs that managers use to assess project risk using a repertory grid technique. It provides an insight into how a project risk analysis process can be linked with project returns in strategic investment appraisal (SIA) in a divisionalised organisation. An action research approach was taken to develop a decision matrix to link the risk assessment results to expected project returns as an aid to management in strategic investment decision‐making. It is now embedded in the investment appraisal procedures across the European group of companies that participated in the research. It is suggested that the framework adopted in this experimental study is transferable to other organisational contexts.