<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The purpose of this paper is to determine a practical approach of calculation of the systematic risk of companies in line with the CAPM model. By performing an analysis of the methodology used in practice of determining the beta and review of the literature on the subject the accounting rules that make the best possible impact on the change in the level of risk index are determined. In this work on the Polish financial market are also carried out simulations showing the impact of the change in assumptions on the final amount of beta. Based on the empirical results there is a recommendation formulated as to what method should determine beta for public companies using the CAPM model. These boundary conditions are also possible implementations of the proposed approach and possible desirable solutions, if minimum boundary conditions are not met. The defined scope for the use of the recommended method of calculating the risk index allows us to reduce the error probability of over-or underestimation of the value of the index.</p></abstract>

The purpose of this paper is to determine a practical approach of calculation of the systematic risk of companies in line with the CAPM model. By performing an analysis of the methodology used in practice of determining the beta and review of the literature on the subject the accounting rules that make the best possible impact on the change in the level of risk index are determined. In this work on the Polish financial market are also carried out simulations showing the impact of the change in assumptions on the final amount of beta. Based on the empirical results there is a recommendation formulated as to what method should determine beta for public companies using the CAPM model. These boundary conditions are also possible implementations of the proposed approach and possible desirable solutions, if minimum boundary conditions are not met. The defined scope for the use of the recommended method of calculating the risk index allows us to reduce the error probability of over-or underestimation of the value of the index.

Comparison of Risk Index Estimating Methods on the Polish Financial Market

Financial Internet Quarterly

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Comparison of Risk Index Estimating Methods on the Polish Financial Market"}

The purpose of this paper is to determine a practical approach of calculation of the systematic risk of companies in line with the CAPM model. By performing an...

Comparison of Risk Index Estimating Methods on the Polish Financial Market

Published Online: Apr 15, 2019

Page range: 1 - 11

Received: Apr 22, 2014

Accepted: Sep 30, 2018

DOI: https://doi.org/10.2478/fiqf-2018-0023

Keywords
valuation, systematic risk, cost of capital, bankruptcy forecasting

© 2018 Krzysztof Janas, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Comparison of Risk Index Estimating Methods on the Polish Financial Market

Published Online: Apr 15, 2019

Page range: 1 - 11

Received: Apr 22, 2014

Accepted: Sep 30, 2018

DOI: https://doi.org/10.2478/fiqf-2018-0023

Keywordsvaluation, systematic risk, cost of capital, bankruptcy forecasting

© 2018 Krzysztof Janas, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
valuation, systematic risk, cost of capital, bankruptcy forecasting