A Study On The Idiosyncratic Risk Return Of A Company

The proportion of company specific risk in investment decision is becoming larger and larger,but there is a certain lack of reasonable quantification method of company specific risk.Different companies within the same industry because of scale,management,technology,personnel,finance and other aspects of the different,the risk level is also different.The expected return on equity determined by weighted average cost of capital(WACC)is difficult to reflect the firm’s idiosyncratic risk return.In the United States,relevant research results show that the unique risk return volatility and market risk return wave company is the same,the market has emerged for small business specific risk pricing.Relevant research further points out that the company’s unique risk level is a residual value,which is mainly reflected in the residual level of the predicted return and the actual return.In order to verify the unique risk return rate of A company,the expected return rate of equity is set as the sum of the unique risk return rate,the scale risk return rate and the market risk return rate.Then select 4 listed companies in the same industry as the comparison companies from the domestic securities market,through the comparability analysis between A company and the comparison company,confirm the similarities and differences,and determine the capital structure as the center of the difference adjustment method.By obtaining the sample and distribution of the company’s beta coefficient and the change of the yield,and calculating the residual sum of squares of the residual value from the sample data,the non systematic risk coefficient is obtained.Then,by using the method of difference adjustment between A company and contrast company,the beta coefficient and non systematic risk coefficient of A company are obtained.Based on the addition of the risk and the analysis of CAPM logic,the definition of company specific analysis and give the risk return rate of capital cost and application of "case",in the confirmation rate risk return market A company,is that all of its unique risk return to the non system risk coefficient multiplied by the market rate of return.According to the research results of yield risk that the scale of the enterprise scale and risk return,eventually quantify the risk return rate of A’s unique.The research shows that the equity risk return rate of A company is lower than the net asset return of A company in 2016;the average capital cost(WACC)is equal to the total asset return rate of A company in 2016.At the same time,due to the lack of the overall research in the company specific risk field,the comparability and confirmation adjustment methods of A company and the comparison company may not be comprehensive,the data validity may be insufficient and the research results are limited to small enterprise scope.It is hoped that the research on the unique risk return of A company can provide some ideas for the quantification of the idiosyncratic risk return rate of other companies.