The Risk-Return Paradox for Strategic Management by Joachim Henkel

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The Risk-Return Paradox for Strategic Management

Author : Joachim Henkel

Publisher : SSRN

Published : 2013

ISBN-10 :

ISBN-13 :

Number of Pages : 28 Pages

Language : en

Descriptions The Risk-Return Paradox for Strategic Management

The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive. Measuring risk as the variance of a series of accounting-based returns, Bowman obtained the puzzling result of a negative association between risk and mean return. This finding, known as the Bowman paradox, has spawned a remarkable number of publications, and various explanations have been suggested. The present paper contributes to this literature by showing that skewness of individual firms' return distributions has a considerable spurious effect on the empirically estimated mean-variance relationship. I devise a method to disentangle true and spurious effects, illustrate it using simulations, and apply it to empirical data. It turns out that the size of the spurious effect is such that, on average, it explains the larger part of the observed negative relationship. My results might thus help to reconcile mean-variance approaches to risk-return analysis with other, ex-ante, approaches. In concluding, I show that the analysis of skewness is linked to all three streams of literature devoted to explaining the Bowman paradox.

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Results The Risk-Return Paradox for Strategic Management

Attitudes toward Risk and the Risk-Return Paradox: Prospect Theory - This study attempted to explore the role of attitudes toward risk in the management of strategic risk and thus to enrich understanding of Bowman's risk-return paradox. Recent research in behavioral decision theory and pros-pect theory (Kahneman & Tversky, 1979; Laughhunn, Payne, & Crum, 1980)

A risk/return paradox for strategic management - - A risk/return paradox for strategic management Paperback - September 5, 2011 by Edward H Bowman (Author), Sloan School of Management (Creator) See all formats and editions

PDF STRATEGIC RISK MANAGEMENT - New York University - Wallis estimates the risk tolerance measure for each of the firms in the sector by looking at the decisions made by the firms in terms of investment opportunities. 3 Bowman, , 1980, A risk/return paradox for strategic management, Sloan Management Review, v21, 17-31

[PDF] The Risk-Return Paradox for Strategic Management: Disentangling - The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive. Measuring risk as the variance of a series of accounting-based returns, Bowman obtained the puzzling result of a negative association between risk and mean return. This finding, known as the Bowman paradox, has spawned a

The risk‐return paradox for strategic management: disentangling true - The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive. Measuring risk as the variance of a series of accounting‐based returns, Bowman obtained the puzzling result of a negative association between risk and mean return

Attitudes Toward Risk and The Risk-Return Paradox: Prospect Theory - An examination of the structural stability of Bowman's risk-return paradox. Academy of Management Proceedings: 7-11. Google Scholar; Fiegenbaum A. , Thomas H. 1986. Dynamic and risk measurement perspectives on Bowman's risk-return paradox for strategic management: An empirical study. Strategic Management Journal, 7: 395-407. Google Scholar

Bowman's risk-return paradox: An agency theory perspective - Our theory yields two testable hypotheses: the risk-return paradox will be exacerbated by factors that contribute to this agency problem (, career concerns), and mitigated by those that alleviate agency conflicts (, governance mechanisms). Career concerns can spur managers to take strategic decisions that pose high risks and low returns

The Risk-Return Paradox for Strategic Management: Disentangling True - The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive. Measuring risk as the variance of a series of accounting-based returns, Bowman obtained the puzzling result of a negative association between risk and mean return

The Risk-Return Paradox for Strategic Management: Disentangl - Abstract. The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive. Measuring risk as the variance of a series of accounting-based returns, Bowman obtained the puzzling result of a negative association between risk and mean return

A Risk/Return Paradox for Strategic Management - The total set of industries from Value Line is used to demonstrate that business risk and return are negatively correlated across companies within industries. Some empirical questions about industries themselves are also raised. The concepts of income smoothing and corporate strategy are utilized to explain this apparent paradox. Further work is both suggested and

The risk‐return paradox for strategic management: disentangling true - The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive. Measuring risk as the variance of a series of accounting-based returns, Bowman obtained the puzzling result of a negative association between risk and mean return

The Risk-Return Paradox for Strategic Management: Disentangling True - THE RISK-RETURN PARADOX FOR STRATEGIC MANAGEMENT: DISENTANGLING TRUE AND SPURIOUS EFFECTS JOACHIM HENKEL* TUM Business School, Munich University of Technology, Munich, Germany The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive

The Risk-Return Paradox for Strategic Management ... - ResearchGate - A large literature in strategic management has investigated the apparent risk-return paradox, offering prospect theory (Chou et al., 2009;Fiegenbaum and Thomas, 1988;Gooding et al., 1996

PDF A risk/return paradox for strategic management - ARISK/RETURNPARADOXFORSTRATEGICMANAGEtffiNT EdwardH,Bowman WP1107-80 " March1980 TobepublishedintheSloanManagementReview Spring,1980

High Risk, Low Return (and Vice Versa): The ... - Academy of Management - Dynamic and risk measurement perspectives on Bowman's risk-return paradox for strategic management: An empirical study. Strategic Management Journal, 7: 395-407. Google Scholar; Fiegenbaum, A., & Thomas, H. 1988. Attitudes toward risk and the risk-return paradox: Prospect theory explanations. Academy of Management Journal, 31: 85-106

A risk/return paradox for strategic management - Working paper (Sloan School of Management) ; 1107-80. Keywords. Strategic planning., Risk management

A risk/return paradox for strategic management - Archive - A risk/return paradox for strategic management by Bowman, Edward H; Sloan School of Management. Publication date 1980 Topics Strategic planning, Risk management Publisher Cambridge, Mass. : Massachusetts Institute of Technology Collection mitlibraries; blc; americana Digitizing sponsor MIT Libraries Contributor

- Existing research studies, most of which are summarized in Table 1, have largely supported a positive risk-return association. However, Bowman (1980) discovered that within most industries, risk and return were nega- tively correlated. He described that research outcome as a paradox for strate- gic management, since the findings ran counter to the conventional wisdom that argued for a positive association. He also argued that firms' risk attitudes may influence risk-return profiles and that

The Risk-Return Paradox for Strategic Management ... - JSTOR - The concept of risk is central to strategic manage-ment. In particular, the relationship between the risk and return of firms is highly relevant both to practitioners and scholars. One important strand of literature measures risk and return as variance and mean, respectively, of a series of returns on equity, assets, or sales

The risk‐return paradox for strategic management - The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive. Measuring risk as the variance of a series of accounting-based returns, Bowman obtained the puzzling result of a negative association between risk and mean return

[PDF] The Risk-Return Paradox for Strategic Management - The Risk-Return Paradox for Strategic Management: Disentangling True and Spurious Effects J. Henkel Published 1 January 2008 Business Risk Management The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive

The Risk-Return Paradox for Strategic Management ... - SSRN - The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive. Measuring risk as the variance of a series of accounting-based returns, Bowman obtained the puzzling result of a negative association between risk and mean return

The Risk-Return Paradox for Strategic Management - The concept of risk is central to strategy research and practice. Yet, the expected positive association between risk and return, familiar from financial markets, is elusive. Measuring risk as the variance of a series of accounting-based returns, Bowman obtained the puzzling result of a negative association between risk and mean return