RT Generic
T1 Random walks and the temporal dimension of risk
A1 Estrada, Javier
A2 Universidad Carlos III de Madrid. Departamento de Economía de la Empresa, 
AB The assumption that stock prices follow a random walk has critical implications for investorsand firms. Among those implications is the fact that data frequencies and investment horizonsare irrelevant (as defined below) when evaluating the risk of a security. However, if stockprices do not follow a random walk, ignoring either issue may lead investors to makemisleading decisions. Using data from the first half of _the decade for thirteen Europeansecurities markets, I first argue that stock prices in these markets (not surprisingly) do notfollow a random walk. Then, I show that investors that assume otherwise are bound tounderestimate the total and systematic risk (and overestimate the compound and risk-adjustedreturns) of European stocks. The underestimation of risk ranges between .53% and 2.94% amonth, and averages 1.25% a month.
YR 1997
FD 1997-04
LK https://hdl.handle.net/10016/7040
UL https://hdl.handle.net/10016/7040
LA eng
DS e-Archivo
RD 27 jul. 2024