Abstract
This paper undertakes a comparative analysis of the stock market perception of risk of U.S.-listed water transportation and other transport sectors such as air transportation, rail transportation, trucks, and other related industries such as electricity, gas, petroleum refining and real estate over the period July 1984–June 1995. This is done by relating cross-sectional differences in the returns of the companies in each industry to the stock market and to the following set of micro-economic factors: market value of equity; book to market value of equity ratio; earnings to price ratio; asset to market value of equity; and asset to book value of equity. The Seemingly Unrelated Regression methodology (SUR) is employed to estimate the above relationships due to its advantages over ordinary least squares. Our findings reveal that the water transportation industry is the only transportation industry which exhibits lower systematic risk than the market and that the asset-to-book ratio, along with the market, has explanatory power over its cross-sectional returns. Also, the micro factors which are significant in explaining stock returns vary between industries.
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