Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5069686 | Finance Research Letters | 2013 | 12 Pages |
Abstract
We use an empirical model to categorize firms into portfolios based on operational risk. Using these portfolios, we show that a strategy of buying firms in the highest decile of operational risk and shorting firms in the lowest decile of operational risk earned a positive but insignificant risk-adjusted average return of 0.72% per month from 1990 to 2000. However, from 2001 to 2010, the same strategy earned a significantly negative risk-adjusted average return of â1.50% per month. This change occurred during a time characterized by an increasing number of high profile operational losses and regulatory changes surrounding operational risk.
Related Topics
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Economics and Econometrics
Authors
Michael Shafer, Yildiray Yildirim,