The Accounting Review Vol. 47 No. 2 1972
Covariability of Segment Earnings and Multisegment Company Returns.
Abstract
This article focuses on portfolio theory and company returns. Two topics of recent interest in the literature of accounting and finance are portfolio theory and the reporting of segment financial data by large, multisegment corporations. In the paper an integration of the two areas will be explored by examining the relationship between the covariability of segment earnings of a sample of multisegment firms and the covariability of the returns of these shares with the market. The purposes are to present an ex post accounting measure of diversification and apply the measure to existing accounting data and relate this accounting measure of diversification and risk to the market determined risk measure in order to provide some empirical evidence as to the market evaluation of diversification at the company level. As early as 1952, researcher Harry Markowitz suggested a portfolio context in which the expected risk of an investment is considered in an investment decision as well as the expected return from the investment. An "efficient" portfolio is one for which the expected risk is minimum for a given expected return.
- DOI
- 10.2308/tar-4482682
- Volume
- 47
- Issue
- 2
- Pages
- 339-345
- Language
- en
- Sources
- openalex crossref