Inventory Policy Incorporating Systematic Risk

ABSTRACT An expected return-systematic risk (r,β) criterion is used to develop a decision framework for investing in inventory. The direct incorporation of risk in the model in the context of the Capital Asset Pricing Model avoids the shortcoming of exogenous risk specification, which is inherent in both the return on investment and cost minimization criteria commonly employed in inventory management.

[1]  S. Ross.  Return, Risk and Arbitrage , 1975 .

[2]  S. Karlin.  Dynamic Inventory Policy with Varying Stochastic Demands , 1960 .

[3]  W. Sharpe.  Portfolio Theory and Capital Markets , 1970 .

[4]  W. Sharpe.  CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK* , 1964 .

[5]  G. Whitmore,et al.  Third-Degree Stochastic Dominance , 1970 .

[6]  S. Ross.  The arbitrage theory of capital asset pricing , 1976 .

[7]  Richard Roll,et al.  A Critique of the Asset Pricing Theory''s Tests: Part I , 1977 .

[8]  Charles W. Haley,et al.  Introduction to Financial Management , 1977 .

[9]  Leroy D. Brooks,et al.  Stochastic Dominance Tests for Selecting Acceptable Debt Issuance Strategies , 1975 .

[10]  Haim Levy,et al.  Relative Effectiveness of Efficiency Criteria for Portfolio Selection , 1970, Journal of Financial and Quantitative Analysis.

[11]  Merton H. Miller,et al.  LEASING, BUYING, AND THE COST OF CAPITAL SERVICES , 1976 .

[12]  Nai-fu Chen,et al.  Some Empirical Tests of the Theory of Arbitrage Pricing , 1983 .

[13]  F. Black.  Capital Market Equilibrium with Restricted Borrowing , 1972 .

[14]  J. Lintner.  THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS , 1965 .

[15]  H. Bierman,et al.  The Capital Budgeting Decision , 1960 .

[16]  William W. Hogan,et al.  Toward the Development of an Equilibrium Capital-Market Model Based on Semivariance , 1974, Journal of Financial and Quantitative Analysis.

[17]  E. Fama,et al.  Risk, Return, and Equilibrium: Empirical Tests , 1973, Journal of Political Economy.

[18]  L. D. Brook.  Risk-Return Criteria and Optimal Inventory Stocks , 1979 .

[19]  Timothy J. Nantell,et al.  Variance and Lower Partial Moment Measures of Systematic Risk: Some Analytical and Empirical Results , 1982 .

[20]  Marc R. Reinganum.  Misspecification of capital asset pricing : Empirical anomalies based on earnings' yields and market values , 1981 .

[21]  R. Banz,et al.  The relationship between return and market value of common stocks , 1981 .

[22]  F. Black,et al.  The Capital Asset Pricing Model: Some Empirical Tests , 2006 .

[23]  Van Horne,et al.  Financial Management and Policy , 1968 .

[24]  Vijay S. Bawa,et al.  Abstract: Capital Market Equilibrium in a Mean-Lower Partial Moment Framework , 1977, Journal of Financial and Quantitative Analysis.