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Return Versus Risk. Evidence From Romania

Author

Listed:
  • Daniel Cîrciumaru

    (University of Craiova Faculty of Economics and Business Administration)

  • Raluca Dracea

    (University of Craiova Faculty of Economics and Business Administration)

  • Anca Tanasie

    (University of Craiova Faculty of Economics and Business Administration)

  • Marian Siminica

    (University of Craiova Faculty of Economics and Business Administration)

Abstract

There should be a strong correlation between return and risk. Tools have been developed in order to assess both the return and risk. Yet, the analysis of risk-return correlation is not easy to perform, as the return usually regards the past performance of the business, while the risk regards the future. In order to answer these issues, a survey has been performed in this paper, on nine Romanian companies listed on Bucharest Stock Exchange. Three score functions have been used in order to assess the bankruptcy risk (Altman 1968, Conan and Holder, Anghel) and three ratios of return (return on sales, return on assets, return on equity). The period analyzed ranged from 2007 to 2013. The research allowed verifying the assumptions and highlighting the weaknesses of the tools used to evaluate the risk.

Suggested Citation

  • Daniel Cîrciumaru & Raluca Dracea & Anca Tanasie & Marian Siminica, 2015. "Return Versus Risk. Evidence From Romania," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 1(43), pages 7-28.
    • Handle: RePEc:aio:aucsse:v:1:y:2015:i:43:p:7-28
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    File URL: http://feaa.ucv.ro/AUCSSE/0043v1-001.pdf
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    References listed on IDEAS

    as
    1. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    2. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    bankruptcy risk; score function; return on sales; return on assets; return on equity;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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