RETURN VERSUS RISK. EVIDENCE FROM ROMANIA

Abstract

There should be a strong correlation between return and risk. Tools have been developed in order to assess both the return and risk. Yet, the analysis of risk-return correlation is not easy to perform, as the return usually regards the past performance of the business, while the risk regards the future. In order to answer these issues, a survey has been performed in this paper, on nine Romanian companies listed on Bucharest Stock Exchange. Three score functions have been used in order to assess the bankruptcy risk (Altman 1968, Conan and Holder, Anghel) and three ratios of return (return on sales, return on assets, return on equity). The period analyzed ranged from 2007 to 2013. The research allowed verifying the assumptions and highlighting the weaknesses of the tools used to evaluate the risk.

Keywords

• bankruptcy risk
• score function
• return on sales
• return on assets