RESEARCH OF INVESTMENT RISK USING BETA COEFFICIENT

Domagoj Karacic () and Ivana Bestvina Bukvic ()
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Domagoj Karacic: Faculty of Economics, Josip Juraj Strossmayer University of Osijek, Republic of Croatia
Ivana Bestvina Bukvic: Zagrebacka banka JSC, Zagreb, Republic of Croatia

Interdisciplinary Management Research, 2014, vol. 10, 521-530

Abstract: Beta coefficient is a measure of the investment or asset’s systematic risk in relation to the overall stock market. It enables comparison of level of the risk of investments or assets with different characteristics. Before interpretation of its results it is necessary to understand the specifi city of this coefficient, the conditions of the capital market, as well as investments that are being analysed. This paper analyses the applicability of beta in determining the risks of, by the characteristics, different types of investments and presents the results of the research of level of the risk and return of investments in capital projects compared to investment in a portfolio of selected stocks on the Croatian capital market. Given the above the aim of this work was to determine the usefulness of the beta coefficient and in the different types of investments risk analysis. Analysing the results of the research it has been found that, in the period 2003-2010, according to analyst projections, the inve-stments in capital projects were, in average, less risky compared to investing in a portfolio of selected stocks. It was also found that the expected return on investment in a portfolio of selected stocks is 1.4 times greater than the average expected return on investment in capital projects (measured by the CAPM model). By adjustment of the beta calculation model to the characteristics of the market it was used on, it was found that beta coefficient is a useful measure in the risk analysis and can be used to compare riskiness of, by characteristics, different types of investments.

Keywords: beta coefficient; risk assessment; capital market; decision-making (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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