Impact of financial variables on systematic risk of common stocks: An empirical evidence of Casino Industry



ACKNOWLEDGEMENT

My thanks go out to all who have helped me complete this study and with whom this project may have not been possible. In particular, my gratitude goes out to friends, facilitator and family for extensive and helpful comments on early drafts. I am also deeply indebted to the authors who have shared my interest and preceded me. Their works provided me with a host of information to learn from and build upon, also served as examples to emulate.

DECLARATION

I, [names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

Signed __________________ Date _________________

ABSTRACT

The primary purpose of this study is to investigate the relationship between the key financial variables of casino firms and the returns of their common stocks. In addition to its broad purpose, this study also investigates the risk features and the diversifiability (The risk of price change due to the unique circumstances of a specific security, as opposed to the overall market. This risk can be virtually eliminated from a portfolio through diversification also called unsystematic risk) of casino stocks. First, this study provides empirical evidence on the relationship between the financial variables of firms and their returns in the casino industry. Second, the result of this study shows the overall diversifiability of casino stocks. Finally, this study helps the potential investors and financial managers of the casino industry understand the risk profile of casino stocks.

TABLE OF CONTENTS

ACKNOWLEDGEMENTii

DECLARATIONiii

ABSTRACTiv

CHAPTER # 1: INTRODUCTION1

Problem Statement3

Research Hypothesis3

Significance of the Study4

Structure of the Dissertation4

CHAPTER # 2: LITERATURE REVIEW6

Introduction6

Capital Asset Pricing Model (CAPM)6

The Security Market Line (SML)7

Measure of Diversifiability10

Empirical Study on the Relationship between Financial Variables and Beta10

Liquidity11

Financial Leverage12

Impact of past Literature on Current Work13

Summary14

CHAPTER # 3: METHODOLOGY15

Introduction15

Research Design and Data Collection15

Composition of Sample Firms16

Estimation of Beta16

Limitations of the study16

CHAPTER # 4: ANALYSIS17

The Overview of Financial Performance17

Regression Analysis for Casino Industry17

Correlation Analysis for Casino Industry18

Hypothesis Testing19

Liquidity19

Leverage20

Efficiency21

Profitability21

Article Analysis22

Summary23

CHAPTER # 5: CONCLUSIONS25

Implications of the Study26

REFERENCES28

APPENDIX31

To Run Regression35

To Run Correlation35

CHAPTER # 1: INTRODUCTION

The primary purpose of this study is to investigate the relationship between the key financial variables of casino firms and the returns of their common stocks. In addition to its broad purpose, this study also investigates the risk features and the diversifiability of casino stocks.

Casino gambling is now the largest and the fastest growing sector in the gaming industry which includes casino gambling, lottery, horse racing, and charity. The most extraordinary development in the gaming industry during the 1990s was that casino gambling overtook state lotteries in the generation of gross gambling revenues in 1995. In 1995, casino gambling and video gambling devices produced gross revenues of $16.3 billion and $2 billion, respectively. This phenomenal growth of the casino industry is expected to continue with the 1996 openings of more mega-casino hotels in Las Vegas ...