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Growth and Risk

Published online by Cambridge University Press:  06 April 2009

Lemma W. Senbet  and
Howard E. Thompson
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Extract

Fewings [5] and Myers and Turnbull [13] have arrived at diametrically conflicting conclusions regarding the effect of growth on risk as measured by beta, the relative systematic risk in the Sharpe-Lintner-Mossin (SLM) capital asset pricing model. Fewings states his result in an unequivocal way: “…systematic capitalization risk of common stocks is undoubtedly a positive function of the rate of growth of expected corporate earnings” ([5, p. 53]) Myers and Turnbull, on the other hand, state their result in a more conditional form, making the result depend on the nature of market expectations revisions but conclude that “increasing the growth rate decreases B …” ([13], P. 327).

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 17 , Issue 3 , September 1982 , pp. 331 - 340
Copyright
Copyright © School of Business Administration, University of Washington 1982

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