Market Risk Disclosures Research Articles

The Association Between Earnings Sensitivity Measures and Market Determined Risk Exposures: The Case of Oil Price Risk for Petroleum Refiners

Using a sample of petroleum refining firms, this paper provides evidence that earnings sensitivity measures analogous to those mandated by the SEC's (1997) new market risk disclosure rules are positively associated with stock market determined oil price exposures. We also find that earnings sensitivity measures are useful in predicting future stock market determined oil price exposures. Because sensitivity disclosures under SEC (1997) are either unavailable or cross-sectionally not comparable at the present time, this study constructs proxies for earnings sensitivity measures using extant information. Hence, we view our study as providing early evidence on the risk-relevance of the newly mandated earnings sensitivity disclosures.

Are Earnings Sensitivity Measures Risk-Relevant? The Case of Oil Price Risk for the Petroleum Refining Industry

In this study we use a sample of petroleum refining firms to examine whether earnings sensitivity measures are risk-relevant. Because actual earnings sensitivity measures as per the SEC’s new market risk disclosure rules are either unavailable, incomplete or cross-sectionally uncomparable at the present time, we construct earnings sensitivity measures from extant information from historical financial statements. Our findings indicate that such simulated earnings sensitivity measures are positively associated with contemporaneous stock market determined oil exposures (oil betas). We also find that simulated earnings sensitivity measures are useful in predicting future oil betas after controlling for past oil betas and a number of alternate risk proxies. Our evidence suggests that earnings sensitivity measures provide risk-relevant information.

A review of initial filings under the SEC's new market risk disclosure rules

AbstractReviewing initial filings under the SEC's new market risk disclosure rules, the authors found that disclosures were not satisfactory. Where did companies fail?

Implementing market risk disclosure and other issues

Journal of Corporate Accounting & FinanceVolume 10, Issue 1 p. 157-160 SEC Implementing market risk disclosure and other issues Robert W. Rouse Ph.D., Corresponding Author Robert W. Rouse Ph.D. College of CharlestonCollege of CharlestonSearch for more papers by this author Robert W. Rouse Ph.D., Corresponding Author Robert W. Rouse Ph.D. College of CharlestonCollege of CharlestonSearch for more papers by this author First published: 03 January 2001 https://doi.org/10.1002/(SICI)1097-0053(199823)10:1<157::AID-JCAF15>3.0.CO;2-IAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Volume10, Issue1Autumn (Fall) 1998Pages 157-160 RelatedInformation

Implementing market risk disclosure and other issues

Journal of Corporate Accounting & FinanceVolume 10, Issue 1 p. 157-160 SEC Implementing market risk disclosure and other issues Robert W. Rouse Ph.D., Corresponding Author Robert W. Rouse Ph.D. College of CharlestonCollege of CharlestonSearch for more papers by this author Robert W. Rouse Ph.D., Corresponding Author Robert W. Rouse Ph.D. College of CharlestonCollege of CharlestonSearch for more papers by this author First published: 03 January 2001 https://doi.org/10.1002/(SICI)1097-0053(199823)10:1<157::AID-JCAF15>3.0.CO;2-IAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Volume10, Issue1Autumn (Fall) 1998Pages 157-160 RelatedInformation

Improving the FASB's Requirements for Off-Balance-Sheet Market Risk Disclosures

This paper discusses the requirements and limitations associated with SFAS No. 105 market risk disclosures, empirically examines the current implementation of SFAS No. 105 in the financial disclosures of financial institutions, and proposes improvements to the market risk disclosures presently required by the FASB. The results of the empirical analysis of 35 large U.S. financial institutions show that (1) many firms indicated a concern that statement users are not able to clearly distinguish between required contract dollar amount disclosures and actual risks; (2) although most firms use instruments with OBS risk for proprietary hedging and trading, no firm provides a useful detailed breakdown of the degree of risk attributable to these different activities; (3) the greatest conformity in reporting occurs in those firms with the largest contract dollar volume (in absolute terms and as a percent of equity); and (4) very few firms take any initiative in the reporting of additional disclosures. In light of these findings, this paper proposes a new method of market risk disclosure that is based on the margin required by exchanges and their Clearing Corporations. Margin disclosure is shown to be superior to SFAS No. 105 requirements in that it (1) directly correlates with the true risk of a firm's position, (2) is based on the entire financial position of a firm, (3) is easily obtained for even the most complex financial positions, (4) is dynamic in response to changing market conditions, (5) is determined by an independent third party whose main interest is the measurement of market risk, and (6) is a numeric rather than descriptive measure.

A Test of the Hotelling Valuation Principle

Time-series tests of the Hotelling r-percent rule for natural resource prices have not been strongly supportive, but the tests and the data are subject to serious difficulties. We propose here an alternative testing strategy based on another but less widely known implication of the Hotelling model. We test this implication, which we call the Hotelling Valuation Principle, by regressing the market values of the reserves of a sample of U.S. domestic oiland gas-producing companies on their estimated Hotelling values. We find that the estimated Hotelling values account for a significant portion of the observed variations in market values and that the Hotelling measures are better indicators of the market values of petroleum properties than two widely cited publicly available alternative appraisals.