Risk and Corporate Rate of Return

Irving Nuttall Fisher, George R. Hall

ResearchPublished 1967

A model for measuring the relationship between risk and corporate rates of return. The characteristics of earnings distributions are used in evaluating risk exposure and its influence on profits. Application of the model to a sample of firms indicates that mean rates of return are importantly affected by risk exposure. Firms with large standard deviations have higher profit rates, while firms with positively skewed distributions have lower profit rates. For many industry groups, adjusting nominal profit rates for risk exposure considerably lowers the risk-adjusted rates. This is not true, however, of the drug and aerospace groups. Their risk premiums are very low, and they also have the highest risk-adjusted rates of return. The explanation for such profit patterns, therefore, must be sought in factors other than risk.

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  • Copyright: RAND Corporation
  • Availability: Available
  • Year: 1967
  • Print Format: Paperback
  • Paperback Pages: 20
  • Paperback Price: $20.00
  • Document Number: P-3725

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RAND Style Manual
Fisher, Irving Nuttall and George R. Hall, Risk and Corporate Rate of Return, RAND Corporation, P-3725, 1967. As of September 18, 2024: https://www.rand.org/pubs/papers/P3725.html
Chicago Manual of Style
Fisher, Irving Nuttall and George R. Hall, Risk and Corporate Rate of Return. Santa Monica, CA: RAND Corporation, 1967. https://www.rand.org/pubs/papers/P3725.html. Also available in print form.
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