Abstract:
The main aim of this study was to test whether there is a positive relationship between different financial risk
measures and the expected return of a share. This study was performed in 1995 by Brümmer and
Wolmarans, who obtained results contrary to those of a similar study in the United States of America in
1988. The reasons for the difference were not established. This study follows up the one by Brümmer and
Wolmarans to determine whether the passing of 19 years could have brought about any difference in the
results. This process was initiated by testing a set of variables from a sample size of 107 JSE-listed
companies from 2002 to 2012 for linearity. As there was no such linear relationship between any of the
variables, no assumptions can be made about any relationship between share return and the risk measures
tested here. If investors were risk averse, one would expect a positive relationship between different
financial risk measures and the expected return of a share. This is not the case in the South African market.
