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Market and Accounting Measures of Risk: The Case of the Frankfurt Stock Exchange

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  • Anna Rutkowska-Ziarko

    (Faculty of Economic Sciences, Institute of Economics and Finance, University of Warmia and Mazury in Olsztyn, 10-719 Olsztyn, Poland)

Abstract

The main purpose of this study was to explore the relationship between market and accounting measures of risk and the profitability of companies listed on the Frankfurt Stock Exchange. An important aspect of the study was to employ accounting beta coefficients as a systematic risk measure. The research considered classical and downside risk measures. The profitability of a company was expressed as ROA and ROE. When determining the downside risk, two approaches were employed: the approach by Bawa and Lindenberg and the approach by Harlow and Rao. In all the analyzed companies, there is a positive and statistically significant correlation between the average value of profitability ratios and the market rate of return on investment in their stocks. Additionally, correlation coefficients are higher for the companies included in the DAX index compared with those from the MDAX or SDAX indices. A positive and in each case a statistically significant correlation was observed for all DAX-indexed companies between all types of market betas and corresponding accounting betas. Likewise, for the MDAX-indexed companies, these correlations were positive but statistical significance emerged only for accounting betas calculated on ROA. As regards the DAX index, not every correlation was positive and significant.

Suggested Citation

  • Anna Rutkowska-Ziarko, 2022. "Market and Accounting Measures of Risk: The Case of the Frankfurt Stock Exchange," Risks, MDPI, vol. 10(1), pages 1-17, January.
    • Handle: RePEc:gam:jrisks:v:10:y:2022:i:1:p:14-:d:719277
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    References listed on IDEAS

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    3. Tsai, Hsiu-Jung & Chen, Ming-Chi & Yang, Chih-Yuan, 2014. "A time-varying perspective on the CAPM and downside betas," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 440-454.
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    Cited by:

    1. Anna Rutkowska-Ziarko & Lesław Markowski, 2022. "Accounting and Market Risk Measures of Polish Energy Companies," Energies, MDPI, vol. 15(6), pages 1-21, March.
    2. Małgorzata Tarczynska-Luniewska & Iwona Bak & Uma Shankar Singh & Guru Ashish Singh, 2022. "Economic Crisis Impact Assessment and Risk Exposure Evaluation of Selected Energy Sector Companies from Bombay Stock Exchange," Energies, MDPI, vol. 15(22), pages 1-25, November.
    3. Rutkowska – Ziarko, Anna & Markowski, Lesław & Abdou, Hussein A., 2024. "Conditional CAPM relationships in standard and accounting risk approaches," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).
    4. Anouar Faiteh & Mohammed Rachid Aasri, 2022. "Accounting Beta as an Indicator of Risk Measurement: The Case of the Casablanca Stock Exchange," Risks, MDPI, vol. 10(8), pages 1-13, July.

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