Deregulation and Risk

23 Pages Posted: 11 Mar 2009 Last revised: 14 Mar 2009

See all articles by Elias J. Semaan

Elias J. Semaan

James Madison University

Pamela Peterson Drake

James Madison University

Date Written: March 11, 2009

Abstract

The recent market turmoil has brought attention to how deregulation of the financial sector affects risk. The purpose of our study is to examine the market's perception of risk associated with deregulation. We accomplish this by decomposing security risk around deregulation into idiosyncratic and systematic risk. We examine deregulation of several industries, and find a consistent pattern of risk adjustment to deregulation. We find increased security risk is temporary and largely idiosyncratic. These results are consistent with the idea that firms in deregulated industries learn to deal with competition.

Keywords: deregulation, risk, idiosyncratic, systematic

JEL Classification: G38, G12

Suggested Citation

Semaan, Elias J. and Drake, Pamela Peterson, Deregulation and Risk (March 11, 2009). Available at SSRN: https://ssrn.com/abstract=1357687 or http://dx.doi.org/10.2139/ssrn.1357687

Elias J. Semaan

James Madison University ( email )

Harrisonburg, VA 22807
United States
540-568-7323 (Phone)

Pamela Peterson Drake (Contact Author)

James Madison University ( email )

Harrisonburg, VA 22807
United States

HOME PAGE: http://www.jmu.edu/cob/finance/

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