A Case Study of General Retail Industry

A Case Study of General Retail Industry
11/04/2011 Comments Off on A Case Study of General Retail Industry Sample Academic Papers admin

Abstract

Firms are exposed to many types of risks both from the internal and external environment. It is very imperative for companies to manage these risks properly in order to survive against the cut throat competition. Companies use different types of strategies to manage these risks. Derivative is one of the most common tools which are used by organizations to hedge the exchange rate risk, commodity risk and interest rates risk etc. There is a lot of research available on many markets of the world which proposes contrasting theoretical arguments about the relationship between use of derivative and stock price exposure of the company. But there is no empirical evidence which support their arguments. The researcher of this paper has practically proved that derivatives actually reduce the equity risk of the company. The approach used for this research is a kind of mix of case study and quantitative. The companies used for research belongs to the UK General retail industry. Standard deviation of stock returns and Beta are considered to be the proxies of risks. The model used for research is an econometric model based on the Ordinary Least Square (OLS) method. The main limitation of the research is that it result may not be applicable to other sectors of economy. Another limitation is the access to limited amount of data. Otherwise the model could have been tested from more variable like the effect of a particular type of derivative on hedging the risks. Hence, it is expected that the research in future may cover these aspect of risk management.

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