The relationship between risk and the cost of equity in the context of sensitivity of beta coefficient – comparative study for the largest companies listed on Warsaw and Frankfurt Stock Exchange
Year: 2025
Type: article
Abstract: Purpose: The main objective of the article is to examine the stability of the beta parameter for the largest companies listed on the Warsaw and Frankfurt Stock Exchanges. Design/methodology/approach: The study is a comparative analysis. The hypothesis is subjected to statistical verification, stating that beta parameters are stable. The estimation of beta parameters is carried out using the least squares method and a simple rate of return in the period 2005-2021, while the verification of the stability hypothesis is carried out based on Jarque-Bera test, Breusch-Pagan test, and t-Student test. Findings: The presented research results indicate that for companies listed on the WSE, along with the extension of the period of measuring the frequency of rates of return, the beta parameter is characterized by a lower level of sensitivity. This is probably due to the greater amplitude of fluctuations in the rate of return with increasing the frequency of measurement. Practical implications: In the company's finances, the beta parameter plays a key role in measuring investment risk. Since its introduction, it has been subjected to numerous empirical studies and analyses in both developing and highly developed markets. A positive phenomenon is the insensitivity of the beta parameter to the change in the rate of return of the stock market index for the monthly measurement of the rate of return in the case of companies with the largest capitalization on the Polish stock market. Originality/value: In Poland, research is carried out on the properties of the beta parameter, however, there is no research on its comparability to the economies of countries where the capital market is highly developed. Keywords: beta stability, correlation, coefficients, rate of return, interval, risk. Category of the paper: Research paper. JEL Classification Codes: G10, G15, C58.
Authors: Deloitte Audyt sp. z o.o., Michał Gnap, Monika Turek-Radwan
Institution: Krakow University of Economics
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4409415307