On the Relationship between Accounting Risk and Return: Is There a (Bowman) Paradox?

Bowman's (1980, 1982, 1984) finding of a negative relationship between the means and variances of accounting returns (the B owman P aradox) spurred a considerable literature analyzing this phenomenon. The sign of the relationship between the mean return on equity ( ROE ) and its standard deviation remains unresolved. Concerns were raised about ROE measurement and statistical techniques used in establishing the paradox. The papers critiquing (and...