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Validating Downside Accounting Beta: Evidence from the Polish Construction Industry

In: Contemporary Trends and Challenges in Finance

Author

Listed:
  • Anna Rutkowska-Ziarko

    (University of Warmia and Mazury in Olsztyn)

  • Christopher Pyke

    (Lancashire School of Business and Enterprise)

Abstract

This paper applies a method for measuring market risk called Downside Accounting Beta (DAB), previously developed by Rutkowska-Ziarko and Pyke (Econ Bus Rev 3(4):55–65, 2017). DAB shows how changes in the profitability of a sector affect the profitability of a company in that sector. DAB can also be applied to whole market. Empirical evidence is presented using the data from companies listed in the Polish construction sector of the Warsaw Stock Exchange. The analysis concludes that there are significant similarities between market betas and accounting betas. It also demonstrates that accounting betas using Return on Assets (ROA) and Return on Sales (ROS) are positively correlated with market betas and that there is a significant correlation between accounting betas with variance and semi-variance approaches. In addition, the paper identifies that the systematic risk on the Warsaw Stock Exchange is connected with the sensitivity of the company’s profitability of assets (ROA) and sales (ROS) in comparison with profitability for the whole sector. The practical implication of this research is that investors, owners and managers can apply DAB using ROA to calculate the systematic risk of companies that are not listed on stock markets and consequently to identify the levels of risk associated with companies within the sector.

Suggested Citation

  • Anna Rutkowska-Ziarko & Christopher Pyke, 2018. "Validating Downside Accounting Beta: Evidence from the Polish Construction Industry," Springer Proceedings in Business and Economics, in: Krzysztof Jajuga & Hermann Locarek-Junge & Lucjan T. Orlowski (ed.), Contemporary Trends and Challenges in Finance, pages 81-87, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-76228-9_8
    DOI: 10.1007/978-3-319-76228-9_8
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    Cited by:

    1. Anna Rutkowska-Ziarko, 2019. "Korelacja pomiędzy rentownością a księgowymi współczynnikami beta dla polskiego sektora budowlanego," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 54, pages 371-382.
    2. Anna Rutkowska-Ziarko & Lesław Markowski, 2022. "Accounting and Market Risk Measures of Polish Energy Companies," Energies, MDPI, vol. 15(6), pages 1-21, March.

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