QUASI-BETA INDEX: MULTIDIMENSIONAL COMPARATIVE ANALYSIS APPLICATION TO DETERMINE RISK INDEX FOR STOCK INVESTMENTS ON THE WARSAW STOCK EXCHANGE

Abstract

Cost of capital is the key parameter when evaluating a company’s financial performance and valuing a firm or a project. The cost of equity calculation methods most commonly used in practice are based on market data. When such data is not available, classical methods used to determine required rate of return on equity capital are substituted with techniques based on accounting data. One of these techniques is multidimensional comparative analysis. This text shows an attempt to assess quasi-beta indices using multidimensional comparative analysis. Using five financial ratios calculated for companies from the Warsaw Stock Exchange indices WIG20, mWIG40 and sWIG80, risk coefficients were determined as taxonomic measures of development, and then they were compared to traditional beta indices. The final results are promising – the highest values of quasi-beta indices are assigned to companies that are characterized as above average in risk level.