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**1 - 8**of**8**### Professeur associe de finances Ecole de commerce

"... Risk and return do not have the clearcut negative relationship that we assume in our textbook treatment. Industry level studies in different countries have shown that risk and return are positively related above industry median (rate of return) but negatively related below industry median (rate of r ..."

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Risk and return do not have the clearcut negative relationship that we assume in our textbook treatment. Industry level studies in different countries have shown that risk and return are positively related above industry median (rate of return) but negatively related below industry median (rate of return). These findings contradict any model along the line of capital asset pricing model. It also is inconsistent with arbitrage pricing model. However, these observations are consistent with the Prospect Theory. I view this phenomenon in the context of anomalies in finance. I explore practical implications in terms of investment strategies. 195 Relation entre Risque total et rendement: une analyse faite B la lumihre d’un nouveau paradigme R&urn6 Tapen Sinha

### and

, 2001

"... Despite much research, debate continues about the impact of risk taking on a firm’s future performance. Unlike prior studies, we propose that risk-return relationships evolve as firms age and learn, particularly in high-velocity settings where accumulated knowledge affects how firms respond to techn ..."

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Despite much research, debate continues about the impact of risk taking on a firm’s future performance. Unlike prior studies, we propose that risk-return relationships evolve as firms age and learn, particularly in high-velocity settings where accumulated knowledge affects how firms respond to technological change. Discerning this requires three things absent from prior analyses: (1) studying an entire population; (2) modeling evolutionary processes; and (3) using separate models to capture how a firm’s gains and losses (i.e., its strong and weak performances) unfold across time. Using this framework, we found that (a) risk-return relationships generally evolved from positive to negative as firms aged; because (b) firms learned to avoid large losses at younger ages than they learned to sustain large gains; yet (c) the risk taking that followed below-aspiration performance moderated those effects such that major setbacks prompted large future gains and large future losses among older firms and downward spirals among younger ones. 1 Relationships between risk and return are central to our lives. In the hope of emotional or monetary rewards, some people take risks by climbing mountains, changing employers, or switching careers. Some executives take risks in pursuit of better pay and enhanced reputations, and some firms pursue risky strategies in a quest for higher sales and profits.

### IS THE RISK-RETURN PARADOX STILL ALIVE? 1

"... To date, the validity of empirical Bowman’s paradox papers that employ mean-variance approach for testing the risk/return relationship are inherently unverifiable and their results cannot be generalized. However, this problem can be overcome by developing an econometric model with two fundamental ch ..."

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To date, the validity of empirical Bowman’s paradox papers that employ mean-variance approach for testing the risk/return relationship are inherently unverifiable and their results cannot be generalized. However, this problem can be overcome by developing an econometric model with two fundamental characteristics. The first one is the use of a time series model for each firm, avoiding the traditional cross-sectional analysis. The other one is to estimate a model with a single variable (the firm rate of return), but whose expectation and variance are mathematically related according to behavioral theories hypotheses, forming a heterocedastic model similar to “GARCH”. Our results agree with behavioral theories and show that these theories can also be carry out with market measures.

### Performance, firm size, and factory expansion PERFORMANCE, FIRM SIZE, AND FACTORY EXPANSION IN THE SHIPBUILDING INDUSTRY

, 2002

"... Earlier versions of this paper benefited from the suggestions of Hayagreeva Rao, Harry Sapienza, Freek Vermeulen, and seminar participants at the University of Michigan and ..."

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Earlier versions of this paper benefited from the suggestions of Hayagreeva Rao, Harry Sapienza, Freek Vermeulen, and seminar participants at the University of Michigan and

### Business Policy and Strategy Division ORDINAL STRATEGIC RISK AND RETURN: A FRESH LOOK AT BOWMAN’S PARADOX

"... Abstract. This paper examines the risk-return relationship from a sample of 34 firms listed on the CAC 40 stock market index over the period 1993-2002. The test of risk-return association uses two distinct risk measures: the strategic risk of the firm, based on the ordinal approach proposed by Colli ..."

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Abstract. This paper examines the risk-return relationship from a sample of 34 firms listed on the CAC 40 stock market index over the period 1993-2002. The test of risk-return association uses two distinct risk measures: the strategic risk of the firm, based on the ordinal approach proposed by Collins and Ruefli (1992), and the conventional variance of returns. The total sample is then divided into two sub-samples employing the median performance criterion. The aim is to evaluate both the reality of Bowman's paradox and validity of arguments derived from prospect theory used to explain it. The results indicate that the nature of riskreturn relationship is heavily conditioned by the risk measure utilized. They also invite to reconsider the traditional approach of Bowman's paradox. Key words. Ordinal strategic risk − Bowman’s paradox − Prospect theory.

### In Press- Academy of Management Journal COLLABORATION AND PERFORMANCE IN FOREIGN MARKETS: THE CASE OF YOUNG, HIGH-TECHNOLOGY, MANUFACTURING FIRMS

"... Marketing and Entrepreneurship in Nice, France. I am grateful to the editors and anonymous reviewers ..."

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Marketing and Entrepreneurship in Nice, France. I am grateful to the editors and anonymous reviewers

### . PERSPECTIVES ON FIRM DECISION MAKING DURING RISKY TECHNOLOGY ACQUISITIONS

, 2011

"... COPYRIGHT ..."

### THE RISK-RETURN FALLACY

, 2000

"... We assume that in the world of business, higher risks are only taken when rewarded with higher expected returns. This supposition has been confirmed empirically using capital market data. However, accounting measures have yielded puzzling results: using the mean and variance of ROE as measures of re ..."

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We assume that in the world of business, higher risks are only taken when rewarded with higher expected returns. This supposition has been confirmed empirically using capital market data. However, accounting measures have yielded puzzling results: using the mean and variance of ROE as measures of return and risk, respectively, Bowman (1980) and other researchers find a negative relationship between the measures. There are many suggested explanations of this seemingly paradoxical result, some of which relate to model misspecifications. Surprisingly, one obvious source of an artificial risk-return “paradox ” has been neglected. This is the skewness of each firm’s ROE distribution. Using data from German firms, my study finds a significantly negative skewness. This skewness alone, even if firms were otherwise identical, brings about a negative relationship between mean and variance that is comparable in size to that found in the data. Thus, it is not clear if the empirical result really stems from a negative relationship between risk and return. It could be an artifact resulting from the inadmissible ex post measurement of risk. Hence, the “paradox ” is highly questionable. 1