Risk-Adjusted STOCK Performance

Abstract Hospitality stock investors, like hospitality operators and customers, are important constituents of the hospitality industry. Knowing the risk and return associated with hospitality investment and the risk-adjusted performance of hospitality stock portfolio in the capital market is of critical importance to hospitality investors. This study compares the risk-adjusted stock performances of three hospitality sectors (hotel/ motel, restaurant, and casino/gaming) as three portfolios during the most recent economic downturn (2000–2003). Four portfolio performance indexes-Treynor ratio, Sharpe ratio, Jensen ratio, and Appraisal ratio-were estimated to measure their risk-adjusted performances. The results show that the casino/gaming sector performed the best, followed by the restaurant sector. The hotel/motel sector was the weakest performer among the three, mainly due to its higher risks. Our analysis suggests that the hotel/motel sector may improve its market performance via prudent growth and less reliance on debt financing.