AN INVESTIGATION INTO THE EFFECT ON MARKET RISK OF INVESTMENT IN NON-HEDGE DERIVATIVES BY LARGE MANUFATURING COMPANIES IN IN THE UNITED STATES – COUNTER EMPIRICAL STUDY

Gary G. Johnson
Jing Xie
Southeast Missouri State University
ABSTRACT
This study examines the relationship between investment in non-hedge derivatives and
stock betas of large U.S. manufacturing companies. Tests conducted show no significant
relationship, suggesting that companies in this industry are not penalized by the markets for holding
these instruments. Although no significance was found, it is clear that speculation in derivatives is
risky. In a risk tolerance profile developed from this study, the United States (U.S.) manufacturers
rank in the “somewhat risky” range for their use of derivatives.