Cover: Risk and the Aerospace Rate of Return.

Risk and the Aerospace Rate of Return.

Published 1967

by Irving Nuttall Fisher, George R. Hall

Purchase Print Copy

 Format Price
Add to Cart Paperback78 pages $25.00

The relationship between risk and profit is explored and a method for measuring the risk component of corporate earnings is developed. Average risk premiums and risk-adjusted rates of return are estimated for aerospace and ten other industry groups. Risk is defined as the probability that earnings in some future period will differ from an anticipated value. Assuming that, on average, profit expectations are fulfilled, risk can be measured by characteristics of the earnings distribution. Standard deviation and skewness are the statistical variables used to measure the firm's risk exposure. A statistically significant relationship is found between average rates of return on net worth and both standard deviation and skewness. Average risk adjusted rates of return are estimated for each industry group and compared with nominal rates of return. The risk-adjusted rates of return for drugs and aerospace are noticeably larger than those for the other industry groups. This finding implies that, for this sample, above-average rates of return in the aerospace group cannot be explained by above-average risk exposure. 78 pp. Ref.

This report is part of the RAND research memorandum series. The Research Memorandum was a product of RAND from 1948 to 1973 that represented working papers meant to report current results of RAND research to appropriate audiences.

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit

RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.