Systematic Risk and Revenue Volatility

Posted: 10 Jun 2002

See all articles by Michael T. Dugan

Michael T. Dugan

University of Alabama

Harry F. Griffin

Sam Houston State University - College of Business Administration

Abstract

We introduce the degree of economic leverage (DEL) as an extension of the existing method of decomposing beta and assess its incremental explanatory power through empirical testing. The DEL is defined as the percentage change in the firm's sales resulting from a unit percentage change attributable to an exogenous economic disturbance. The exogenous economic disturbance employed is the ratio of long-term T-bond rates to short-term T-bill rates. The evidence is supportive of the DEL's role in systematic risk explanation at both the industry and portfolio levels. However, we find mixed results at the firm level.

JEL Classification: G30

Suggested Citation

Dugan, Michael T. and Griffin, Harry F., Systematic Risk and Revenue Volatility. Available at SSRN: https://ssrn.com/abstract=312640

Michael T. Dugan (Contact Author)

University of Alabama ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
205-348-2902 (Phone)
205-348-8453 (Fax)

Harry F. Griffin

Sam Houston State University - College of Business Administration ( email )

1803 Ave I
Huntsville, TX 77341

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