An investigation of the relationship between productivity indices and systematic risk based on the capital asset pricing model (among accepted companies in Tehran stock market)

Abstract

Systematic risk (beta) is one of the most effective factors in predicting the appropriate required rate of returns of portfolios. By understanding the systematic risk of usual portfolios of various companies, investors will be able to consider financial investment more confidentially. The aim of this study was to examine the relationship between productivity indices (operating leverage, financial leverage, combined leverage) as independent variables and systematic risk (Beta) as dependent variables. To do so, 112 companies accepted in Tehran Stock Market were selected based on screening (systematic deletion) in a five-year- period, 2004 to 2008. The required data were gathered from basic financial statements, committee reports, and other available documents in Tehran Stock Market. Regression and Pearson correlation were applied to analyze the data. The results of the study revealed that there was no significant relationship between productivity indices and systematic risk. Some suggestions are provided regarding the topic of the research. Key words: Operating leverage, financial leverage, combined leverage, systematic risk (beta).