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Risk Underestimation As A Consequence Of Assumptions Made In Valuation Models

Author

Listed:
  • Izabela Pruchnicka-Grabias

    (Warsaw School of Economics, Republic of Poland)

Abstract

The first part of the paper concentrates on the analysis of common risk models assumptions that are not fulfi lled in practice. The most vital assumptions of the modern portfolio theory are discussed here and compared with reality to show that they do not come up to practice. The aim of the second part are empirical tests of some of these simplifi cations to justify opinions made in the previous section.

Suggested Citation

  • Izabela Pruchnicka-Grabias, 2013. "Risk Underestimation As A Consequence Of Assumptions Made In Valuation Models," Interdisciplinary Management Research, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 9, pages 513-526.
    • Handle: RePEc:osi:journl:v:9:y:2013:p:513-526
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    File URL: http://www.efos.hr/repec/osi/journl/PDF/InterdisciplinaryManagementResearchIX/IMR9a43
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    More about this item

    Keywords

    portfolio theory; risk;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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