Download This PaperRegulatory Risk
25 Pages Posted: 18 Sep 2011
Date Written: March 26, 2001
Abstract
Assets with a value of over $130billion are regulated in Australia. We define regulatory risk as being regulation that increases the cost of servicing this capital and analyse the sources of this risk. We show that unbiased and symmetric errors will generally create asymmetric risk for the firm, that investors cannot fully diversify against this risk, and that the CAPM beta may even fall when it occurs. The paper concludes with recommendations aimed at reducing regulatory risk.
Keywords: Regualtory Risk
JEL Classification: L51
Suggested Citation: Suggested Citation
Ergas, Henry and Hornby, Jeremy and Little, Iain Robert and Small, John, Regulatory Risk (March 26, 2001). Available at SSRN: https://ssrn.com/abstract=1928292 or http://dx.doi.org/10.2139/ssrn.1928292
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