Deregulation and Risk

Authors

  • Elias Semaan,

    1. Elias Semaan is an Assistant Professor of Finance and Pamela Peterson Drake is a Professor of Finance, both at James Madison University, Harrisonburg, Virginia 22807.
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  • Pamela Peterson Drake

    1. Elias Semaan is an Assistant Professor of Finance and Pamela Peterson Drake is a Professor of Finance, both at James Madison University, Harrisonburg, Virginia 22807.
    Search for more papers by this author

  • We thank the two anonymous referees for their helpful comments. The suggestions resulted in a significantly improved paper.

Abstract

The recent market turmoil has brought attention to how deregulation of the financial sector may affect risk. The purpose of our study is to examine the market's perception of risk associated with deregulation. We accomplish this by decomposing security risk around deregulation into systematic and unsystematic risk. We examine deregulation of several industries and find a consistent pattern of risk adjustment to deregulation, whereby the increase in security risk is temporary and largely unsystematic.

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