Risk and Return

6BU013 Independent Project 2040721
ANALYSIS OF RISK AND RETURN FROM COMMON STOCK OF

COMMERCIAL BANKS IN NEPAL – A CASE STUDY OF EVEREST
BANK LIMITED.
Module: - 6BU013 Independent Project.
Year: 2021 Level: level- 06

Assessment Number/Sequence: 1 Due Date: 07th May 2021
Module Tutor: Dr. Vedesh Chandra Lal
Module Leader: Lee Crofts
Das Sir
Assessment Type: Individual Word counted: 8452
Course Title: International Business Management at Merryland College Biratnagar,
Nepal (MCB)
Submitted to: University of Wolverhampton

Submitted by:
Student number:
Student name: Kisan Bhagat
2040721
Submission Date: 14th May 2021
Abstract
The report focuses on the risk and return analysis of Everest Bank. Risk in the study is
measured by the standard deviation and coefficient of variation. The study analyses the
risk and expected return of Everest Bank with its comparison to Nabil Bank which is one of
the leading banks in Nepal. The comparison of risk and return is mainly focussed on the
Everest Bank and Nabil bank is selected for comparative study. The study has indicated
that Everest Bank has high risk in terms of high standard deviation and high coefficient of
variation but the return from the bank is low. So, there is no risk-return trade-off for the
Everest bank, since taking high risk in the stock of Everest bank has not resulted in high
returns for the investors. Further, the systematic risk which cannot be diversified has
higher proportion in Everest bank which is not a comfortable situation for the investors.
The study tries to present the relationship between the risk and return of common stock in
the commercial banking sector of Nepal. It is essential to analyse the risk and return as it
plays vital role in decision making for investment in any stock.
Table of Contents
Abstract............................................................................................................................................................2
Chapter 1: Introduction....................................................................................................................................5
1.1. Research Background.......................................................................................................................5
1.1.1. Banking Sector History in Nepal................................................................................................5
1.1.2. Brief profile of Everest Bank.....................................................................................................5
1.2. Significance of the Study...................................................................................................................5
1.3. Statement of Problem......................................................................................................................6
1.4. The objective of the Study................................................................................................................6
Chapter 2: Literature Review............................................................................................................................7
2.1. Introduction...........................................................................................................................................7
2.2. Understanding Investment....................................................................................................................7
2.3. Understanding Common Stock.............................................................................................................7
2.4. Market Price per Share (MPS)...............................................................................................................7
2.5. Understanding Earnings per Share (EPS)..............................................................................................8
2.6. Understanding Dividend per Share.......................................................................................................8
2.7. Price to Earnings ratio...........................................................................................................................8
2.8. Expected Rate of Return.......................................................................................................................9
2.9. Risk and Risk Types...............................................................................................................................9
2.9.1. Systematic Risk...................................................................................................................................9
2.9.2. Unsystematic Risk...............................................................................................................................9
2.10. The CAPM model...............................................................................................................................10
2.9. Relation between Risk and Return......................................................................................................10
2.11. Risk Measurement.............................................................................................................................11
2.12. Gap Analysis......................................................................................................................................11
Conceptual Framework..............................................................................................................................12
Chapter 3: Research Methodology.................................................................................................................12
3.1. Research design...................................................................................................................................12
3.2. Research Variables...............................................................................................................................13
3.3. Data collection methods......................................................................................................................13
3.4. Limitation of the study.........................................................................................................................13
3.4. Ethical considerations..........................................................................................................................13
Chapter 4: Presentation and Data Analysis....................................................................................................14
4.1. Analysis of Market price per share, Earnings per share, Dividend and P/E ratio of Everest Bank Limited
....................................................................................................................................................................... 14
4.2. Analysing Standard Deviation, Expected Return, Coefficient of Variation and Variance for Everest and
Nabil banks.....................................................................................................................................................16
4.3. Comparison of risk and return of both the banks...................................................................................18
4.4. Comparing the risk and return with the market......................................................................................19
4.5. Sensitivity Analysis...................................................................................................................................21

4.6. Analysis of Systematic and Unsystematic Risk.........................................................................................23
4.6. Analysis of Correlation between Market, Nabil Bank and Everest Bank..................................................23
4.7. Expected rate of return, Required rate of return and Evaluation of Price...............................................23
4.8. Important Findings from the Study..........................................................................................................24
Chapter 5: Conclusion and Recommendation................................................................................................25
References......................................................................................................................................................27
Appendices.....................................................................................................................................................29
Chapter 1: Introduction
1.1. Research Background
1.1.1. Banking Sector History in Nepal
The first commercial bank in Nepal, Nepal Bank Limited was established in 1937 as a joint
venture with the government of Nepal and the private sector (Nepal Rastra Bank, 2016).
Before the formation of the central bank of Nepal “Nepal Rastra Bank” in 1956, Nepal
Bank Limited was the only banking institute in the country. Nepal Bank was established
with an authorized capital of NR 1 crore with the government of Nepal holding 51% of
shares while the public holding was limited to 49% shares (Investopaper, 2021). Nepal
Rastra Bank as a central bank in Nepal was established in 1956 under the Nepal Rastra
Bank Act, 1955 to guide the development of the domestic financial sector and discharge
the responsibilities of a central bank (Nepal Rastra Bank, n.d.). Nepal Rastra Bank started
issuing Nepalese currency on the behalf of the government in 1959 (Nepal Rastra Bank,
2016).
The private banking sector in Nepal started in the year 1984 after the establishment of
Nabil bank as the first private bank of Nepal and some other foreign banks such as Nepal
Grind lays, Nepal Indosuez, and Nepal Arab bank also started their operation in Nepal.
Due to the political instability and conflicts in Nepal over the years, the banking sector has
faced a lot of obstacles. However, in the present situation, the banking industry has
become strong and is capable to stand still. In Nepal, the banking and financial institution
includes 20 Development banks, 27 Commercial banks, 85 Micro-finance institutions and
22 Finance companies (Nepal Rastra Bank, 2020).
1.1.2. Brief profile of Everest Bank

Everest bank was established in 1994 and is headquartered in Lazimpat, Kathmandu,
Nepal. The bank has 102 branches across the country and more than a million customers
spread across the country. The bank joint venture with the Punjab National Bank (PNB)
which is one the largest nationalized banks located in India which holds around 20%
ownership in Everest Bank Limited. Everest Bank Limited was awarded the title of “the
Bank of the Year, 2006, Nepal” by the Banker, which is a publication of financial times,
London. It is the first bank in Nepal that started operating Any Branch Banking System,
which provides an option to the customers to deposit and withdraw from any branches in
Nepal (Everest Bank, 2021). Everest Bank has an office in Delhi, India to assist Nepalese
citizens in India. The bank provides retail loans which include home loans, vehicle loans,
education loans; SME loans, agriculture loans, and corporate loans in Nepal (Everest
Bank, 2020).
1.2. Significance of the Study

 Significance to the management: Management in any organization is committed

to maximizing the wealth of the shareholders and minimizing the risk. So,
understanding the risk and return of the stock of the bank and its performance is
essential for the management so that they work better for the welfare of
shareholders (O. Ogundajo, Adefisoye, and N. Nwaobia, 2020).
 Significance to the promoters and shareholders: The promotors and the

shareholders are the investor in the banks and are major stakeholders. So,
information regarding the risk and return of the bank is essential for them to assess
their investment and expected return in the future.
 Significance to the Government: Financial Institutions like banks are the

backbone of the economy so, the government and finance ministry needs to keep
track of the performance of the banks. Government is also interested in determining
the taxation of the commercial banks in Nepal along with implementing the
monetary policy in the country in which banks play a vital role.
 Significance to the Creditors: Creditors are one of the stakeholders of the banks
who lend their money to the banks. So, they need to know the financial
performance of the banks along with risks involved and return provided by the
banks before providing credit or loans to the financial institutions.
 Significance to the Researcher: The research study will further enhance the
literature for understanding the risks and return of the common stocks of the banks
and different concepts and aspects related to risk and return. Further, the study will
assist future researchers who are interested in research in this field.
1.3. Statement of Problem

The main issue is the non-availability of information and lack of knowledge for investors in
Nepal who are exploited by the market intermediaries. There is less information and a lack
of ability of investors for understanding the risk and return of the stock market in Nepal due
to which investors are reluctant to invest in the Nepalese stock market. So, a study
regarding the risk and return will add to the information and enhance the knowledge of the
investors, and the address issue regarding the lack of information and analysis available.
Most of the investors in Nepal are not aware of the various risk and their impact on the
expected return. So, there is a requirement for extensive research in this field of study.
Due to the lack of information and knowledge about the risk and return, the financial
institution can easily manipulate the shareholders. The study tries to deal with other issues
as well which are mentioned below:
 What is the risk and return levels of stock of commercial banks in Nepal?
 What is the level of risk per unit of return from common stock?
 What are the criteria for evaluation that the common stock they are holding will give
them a favourable return?
 How can investors diversify the risk?
1.4. The objective of the Study
Following are the major objectives of the research study:
 To identify whether the stock of the selected bank is overpriced, under-priced, or at

equilibrium price?
 To measure the risk and return of Everest Bank Limited and also analyze their
coefficient of variation.
 To measure Risk per unit of stock of Everest Bank Limited.
Chapter 2: Literature Review
2.1. Introduction
This chapter will explain various concepts which are useful in analyzing the risk and return
level in common stocks of commercial banks. Conceptual understanding of Investment,
market price per share, earnings per share, dividend per share, expected rate of return,
the relation between risk and return, various types of risk, risk measurement, and
theoretical aspects of analyzing the risk and return will be presented which will be based
on research finding of various authors. The literature review will assist in gaining
appropriate feedback which in turn will help in broadening the information-based input for
my research (Rowley and Slack, 2004).
2.2. Understanding Investment
The dictionary meaning of Investment explains it as an expenditure made usually to make
profit or income (Merriam-Webster dictionary, n.d.). Investment is utilizing the resources
that have been earned and saved at present in expectation to generate income at a
particular rate of return in the future. As quoted by Virlics (2013), investment refers to an
allocation of resources for medium and long periods with an expectation to recover the
cost of investment so that profits can be made. The return on the investment depends on
the risk involved in the investment and the risk in investment is variability in the expected
returns or a possibility of loss (Senthilnathan, 2016).
2.3. Understanding Common Stock
Common Stock also known as the ordinary share is the ownership share in a company
which provides shareholders the right to vote in shareholder’s meeting. The holder of the
common stocks earns dividends which the company decides to distribute among the
common shareholders. Common stock is a source of long-term funding for the company
and is ownership security. Common Stocks are marketable securities that are bought and
sold on the respective stock exchanges of the concerned country. Common stocks have a
risk of having the last claim on the asset of the company during liquidation (Kandel, 2018).
2.4. Market Price per Share (MPS)
The market price per share is the amount of money which is investors are ready to pay for
holding one share of the company. The market price of the share is an important factor in
making an investment decision and market price per share depends on market forces like
demand and supply as well fundamental factors like the financial performance of the
company, liquidity in the market, government policy, investor sentiments, and technical
influence such as past trend analysis (Sunde and Sanderson, 2009). As suggested by
Sharif, Purohit, and Pillai (2015), the prominent factors that affect the price of a share are
dividend, profitability, operating performance, and book value. Therefore, in making an
investment decision, market price per share can be considered as an important factor that
can be further analyzed to understand where a particular share is overpriced or under-
priced.
2.5. Understanding Earnings per Share (EPS)

The performance of banks can be measured by the financial performance of the company
which reflects profitability. Investors are mostly looking for companies that have the
capability of improving profitability so that the value of the investment is enhanced (Yuliza,
2018). Earnings per share is the amount of profit after tax which is based on the number of
shares outstanding. Earnings per share is a vital indicator of a company’s performance,
risk, and corporate success (Robbetze, De Villiers, and Harmse, 2016). EPS serves as an
indicator of profitability as it measures the performance of the company concerning the
amount of share capital invested to earn such returns. EPS can be used as a financial
performance indicator and higher EPS reflect the better performance of the company and
lower EPS reflects lower profitability and return concerning the outstanding number of
ordinary shares (Seetharama and Rudolph Ra, 2011).
2.6. Understanding Dividend per Share
A dividend is defined as the portion of the net profit which is distributed among
shareholders of the company in the form of cash or company stock as per the company’s
policy. In an under-developing country like Nepal, the purchase decision regarding shares
of a company highly depends on the profitability of the company. As dividend is one of the
best indicators of profitability, thus, dividend play important role in determining the market
price of the company’s share (Dhungel, 2013). Dividend per share is the total of declared
dividend announced by the company holding one share of the company (Singh and
Tandon, 2019). Dividend per share is an essential tool that indicates the performance of
the banks and influences the decision of investors when buying equity shares (Dhungel,
2013). Dividend per share is an essential tool to measure the return that the shareholder
will get by holding the shares of any company.
2.7. Price to Earnings ratio
Price to Earnings ratio in simple terms is the ratio of Market price per share to earnings per
share. Price to Earnings ratio indicates the market assessment of the performance of the
company. It indicates the amount investors are ready to pay for each rupee of the
company’s earnings and Price to Earnings is the variable that impacts the stock price
(Silwal and Napit, 2019). Price to Earnings of a company provides better insights about the
growth potential of the company’s share. Normally, a high P/E ratio could indicate that the
stock price is overpriced or overvalued and when the investor invests in an overpriced
share, there is a risk of financial loss to the investor, however, if the Price to Earnings of a
company is low, it may indicate that the shares of the company are under-priced and if the
investor investments in an undervalued share, there is a high chance of making a profit
(Kumar, 2017). It is observed that the value strategies which are based on the low price
concerning the earnings, book value, dividends, and various other fundamental measures
can out the perform the market as well the growth strategies (Ghaeli, 2017). The Price to
earnings ratio is an important tool that can be used both in academic and investment
research as it indicates the expectation of the market concerning the future growth and is
linked with the company’s risk as well (Beaver and Morse, 1978). Different valuation
models suggest that the Price to Earnings ratio is a function of the expected rate of return
and expected earnings growth and forecasted growth better explains the Price to earnings
ratio rather than the realized growth (Beaver and Morse, 1978). Price to earnings ratio is a
widely used tool by the financial report analyst and it is also used in the estimation of cost
of equity capital and as suggested by Wu (2013), as the companies with the high price to
earnings achieve a lower return on equity in the subsequent years than the companies
with lower price to earnings ratio. Thus, Price to earnings ratio is an important tool for the
valuation of shares of a company and helps in the market assessment of the performance
of the company.
2.8. Expected Rate of Return
The expected rate of return is the return expected by the investors over some future
period. It can be termed as a prediction of return which is subject to uncertain condition.
The expected rate of return is calculated using the mean to derive the estimation for the
future. It can be understood as the arithmetic mean of the return that has been realized in
the previous periods. The expected rate of return should be greater or equal to the
required rate of return for the investment to be viable (Koh Xin Rui et al., 2018).
2.9. Risk and Risk Types
Risk can be termed as the volatility in the expected return or possibility of loss. When there
is a high possibility of loss or if there is high volatility possible return concerning an
investment in stocks, the stock investment can be considered risky (Senthilnathan, 2013).
The variability in the rates of return across various stocks at a different level, given an
indication of the presence of risk and return relationship in the stock market (Kandel,
2018). There can be different sources of risk that impact both organizations and their
shareholders. There can be risks specific to the company like business and financial risks,
risks specific to shareholders like market risk, interest rate risk, and liquidity risks, and
risks that are specific to both firms and shareholders like event risk, tax risk, and
purchasing power risk (Senthilnathan, 2013). Different investors have different attributes
towards the risk, some investors can be risk-neutral, some can be risk-averse and some
are risk-seeking. In the context of risk and return analysis of the stock of commercial banks
and as per the CAPM model, major risk will be divided among systematic risks and
unsystematic risk.
2.9.1. Systematic Risk
Systematic risk refers to the risk that cannot be diversified and related to the market. This
type of risk is present in the entire industry and or some part of the market. Such risk is
caused by the changes in the market or economic condition which affects everyone and
thus, cannot be diversified (John and Boateng, 2017). So, mitigation of the systematic risk
cannot be done by diversification. The sources of the systematic risk that impact the
returns of stocks and creates volatility can be changes in the rate of interest, changes in
inflation, changes in the expectation of the investors regarding the overall performance of
the economy. Systematic cannot be eliminated or mitigated using diversification, thus such
risks are the major determinant of the risk premium in the individual stocks (Senthilnathan,
2013). The beta coefficient represents the systematic risk as per the CAPM model. Thus,
systematic risk is the non-diversifiable market risk.
2.9.2. Unsystematic Risk
The unsystematic risk can be understood as the variation in the expected return that is
caused by the factors which are inherent to the stock itself. This kind of risk can be
mitigated by diversification of the portfolio of securities. It is the risk that applies to only a
small group of securities or single security (Senthilnathan, 2013). Using a combination of
various stocks for different industries within the portfolio can be useful in diversification so
that unsystematic risk can be minimized (Koh Xin Rui et al., 2018). The various sources of
the unsystematic risk can be risk related to management capabilities and management
decisions, labor strikes, competition, availability of raw materials. Since unsystematic risks
can be managed by the organization by internal control and can be fully eliminated but
systematic risks cannot be fully eliminated as it is market-related, so, it is better to have a

low level of systematic risk while unsystematic risk can be afforded by the investors as it
can be managed (Kandel, 2018).
2.10. The CAPM model
CAPM is commonly used for measuring the performance of portfolios of securities and
helps in approximating the cost of capital for different companies available for investment.
To analyze the relationship between risk and return, Capital Asset Pricing Model (CAPM)
is one of the best models in this area. As per this model, the linear relationship exists
between risk concerning investment and return expected from the investment. The model
scrutinizes the security-market line along with systematic risks which are represented by
the beta coefficient and also examines the expected return relationship (Koh Xin Rui et al.,
2018). CAPM model is an efficient tool to understand how markets can assess the stocks,
stock return, and the risk at a different level. The Capital Asset Pricing Model shows
analysis which shows the relationship between the expected return and the systematic risk
of an asset. The relationship between the risk and expected return in this model is
represented by the Security Market Line and the risk (systematic risk) is represented by
the beta coefficient (Pamane and Vikpossi, 2014). CAPM can be used as a reference
model for analyzing the risk and return of commercial banks in our research study.
2.9. Relation between Risk and Return

The risk and return analysis help the investors as well the company management to take a
smart and more efficient decision regarding an asset. In general, the higher the amount of
risk an investor takes the greater is the return which indicates the relationship between the
risk and return of an asset, and thus investors are looking for compensation for taking high
risk (Robbetze, de Villiers and Harmse, 2017). While it is not always true that higher risk
will give higher returns to the investors. Generally, investors are risk-averse and thus, it is
expected that the risky asset will provide high returns to the investors to invest in the risky
asset. The compensation that the investors are looking to gain for assuming the high risk
is termed as a risk premium. Volatility in return can be termed as a primary indication of
risk to the investors (Blume and Friend, 1978). The CAPM model is the most used theory
that explains the relationship between risk and returns and provides conceptual clarity to
determine the various key elements of asset valuation issues. There have been various
models which analyze the risk and return, but none of the models has been able to replace
the Capital Asset Pricing Model which is built on logical arguments (Koh Xin Rui, 2018).
To invest in the stock of any company, investors will look at the risk and return of the
stock. An investor will be reluctant in investing in risky and volatile assets, so the risk
premium acts as a key link between the risk and return. It has been observed in numerous
studies, that the risk and return relationship is positive i.e., higher the risk, higher will be
the return, and vice versa (Robbetze, de Villiers and Harmse, 2017). A study conducted by
Pamane and Vikpossi (2014), also suggested the existence of a positive relationship
between the risk and return, and to accept the high-risk investment, the asset must provide
a higher expected return in comparison to the asset which has low risk. It has also been
observed that the variation in the rate of return across various stocks indicates the
presence of risk and relation in the market (Kandel, 2018). In the case of the common
stock, there high risk which is associated with the claims during liquidation, and the
common stockholder has less priority claiming assets during the liquidation (Kandel,
2018).
To analyze the risk and return patterns of various commercial banks in Nepal, very few
articles have been published and such articles have been reviewed in this research study
to gain more insights from the previous research on a similar topic. The study conducted
by Kandel (2018), analyses the risk and return of commercial banks in Nepal and he had
found that the banks considered for the study, were risky with high volatility in the
expected rate of return. The study also mentioned that the stock price of commercial
banks selected was overpriced as the required rate of return was found to be more than
the expected rate of return. Another study conducted by Rao, Podile, and Navvula (2020)
which analyses the risk and return of selected banks from the Indian stock exchange,
states that a combination of high return and low risk is preferred by the investors. The
evidence from the study showed that there were banks that offered higher returns to the
investors for holding higher-risk stocks. Further, the analyses showed, some banks yielded
low returns with high-risk stocks and there was evidence of banks achieving higher returns
despite taking high risks. So, the research review of various studies sheds light on several
combinations of risk and return relationships from the different financial markets around
the world. Subramanyam and Kalyan (2018) in their study regarding the risk and return
analysis of selected stocks in India, stated that risk and return study of stocks provides
information related to stocks performance in the market, and through their analysis, they
had found investment opportunities for the investor with various combination of risks and
returns.
2.11. Risk Measurement

Different statistical tools can be used for measuring the risk for the research study, some
of the tools that can be used for the risk measurement are described below:
 Standard deviation: Standard deviation measures the dispersion of expected
returns when such returns approximate normal probability returns. As per this
statistical tool, the higher the standard deviation, the larger the dispersion of return,
and thus higher will be the risk (Kandel, 2018).
 Beta Coefficient: Beta is the measurement of the volatility of the stock. It

represents the fluctuation in the price of a stock in relation to the overall market.
The higher the beta, the greater will be the fluctuation of stock with respect to the
overall market, so a higher beta represents higher risk and vice-versa (Chan, 1992).
 Coefficient of variation: Coefficient of variation is a statistical tool to measure risk

per unit of return from the stock. It can be calculated as a ratio of the standard
deviation of an investment and the expected rate of return. It is a measure of risk
per unit of return (Weber, Shafir, and Blais, 2004).
 Correlation Coefficient: This statistical tool measures the degree of relationship

between two or more variables. It also indicates the degree of a positive or negative
relationship between two or more variables. It measures the degree of strength of
the relationship between two or more variables and its value may range from -1 to 0
to +1 (Weber, Shafir and Blais, 2004).
2.12. Gap Analysis

Although there has been some research on a similar topic, has been very little researches
relating to such topics in Nepal. So, this research will build upon the little knowledge
relating to the risk and return of common stocks of selected commercial banks in Nepal.
The major attention in the previous study was on the risk and return aspects of the chosen
commercial banks keeping in mind the investor's perspective. This study further adds
value to the previous studies and has tried to understand the risk per unit of return, the
degree of relationship between risk and return of selected commercial banks, identify the
systematic and unsystematic risks of the selected banks, and will also shed light on the
stocks which are over or under priced among the selected commercial stocks and very few
researches has been done in this field with regards to Nepalese stock market. So, there is
a necessity for alternative perspectives and also to further build on the previously
researched similar topics. Many researchers have taken the time period for the data
analysis below five years, our study analyses data for the last six years. Risk and return
analysis are the most important study for the stakeholder of the company. Thus, the
current evaluation of risk and return will provide the present status of the risk and return of
the common stocks of commercial banks in Nepal
The research study on the topic of “ANALYSIS OF RISK AND RETURN FROM COMMON
STOCK OF COMMERCIAL BANKS IN NEPAL – A CASE STUDY OF EVEREST BANK
LIMITED” has selected Everest bank major focus of the study and risk and return of the
bank will be analyzed with respect to other commercial banks as well. So, the study will
add more information to the previous study related to the risk and return of common stock
of commercial banks in Nepal along with updated information and current scenario of risk
and return of the common stock of commercial banks in Nepal.
Conceptual Framework
The study will be focusing on the risk and return analysis. So, return will be the dependent
variable and risk will be the independent variable. Risks can be further divided into two
categories: Systematic and Unsystematic risk. This research study will focus on the impact
of total risk, systematic, and unsystematic risk on the stock return.
Dependent variable Independent variable
Expected Return Total Risk: Unsystematic and Systematic
Chapter 3: Research Methodology
Research methodology describes the way to solve the research problems in a systematic
manner. This chapter will show how the study will be conducted and consists of research
design methods for data collection and research variables. The study follows the required
research methodology as described in this this chapter.
3.1. Research design
There are two way through which the research design can be constructed. One is
qualitative and the other way is quantitative. In this study both analytical and descriptive
research design has been followed.
Qualitative research: This research offers a complete analysis and description of
research subject without limiting the scope of the study (Neville, 2007).
Quantitative research: Quantitative research refers to dealing with numbers and or
something that can be quantified or measured in a systematic way. For this study,
quantitative research will be conducted as the research majorly deals with the risk and
return which requires quantitative data for like financial figures from annual reports. Further
various statistical tools will be used in this study such as standard deviation, mean,
coefficient of variation and variance.
3.2. Research Variables
Population and sample:

In the present scenario, there are 27 commercial banks operating in Nepal. All the 27
banks are considered as the population for this study. So, the population size in 27 while
the study focuses on one of the selected banks which is Everest Bank limited and in order
to make a comparative study of risk and return, we have also decided to select Nabil Bank
as a reference to understand the patterns of risk and return. Even though the focus of the
study is Everest Bank, comparative study with some of the other commercial banks will
also form the part of the study.
Sources and nature of data: The source of data in this study are majorly secondary
sources. The data will be collected from annual reports of the banks and websites with
information related to stock market of Nepal.
3.3. Data collection methods
Data collection is one of the important parts of this study which will provide insights about
the topic being analysed. There are two way to collect the data: Primary and Secondary.
Primary Data: Primary data are collected first hand by the researcher in the related field of
study and indicates the originality of source of data. In case where secondary data cannot
provide enough evidence and basis for the analysis, in such cases primary data is
required. In this study primary data collection is not required as all the data related to risk
and return can be obtained from the secondary sources.
Secondary data: Secondary data refers to the data already collected and made available
to the researchers. After the primary data is utilized, the data loses its primary nature and
becomes secondary data. In this study, secondary data has been used extensively rather
than the primary data as the research objectives can be met by the secondary data. The
source of collection of the primary data will be the audited annual reports published by the
banks, economic bulletin published by the central bank, websites, journal articles, e-books
and other reliable secondary sources.
3.4. Limitation of the study
 The study focuses on financial information from 2014/15 to 2019/20 only.

 This project report will mainly be based on secondary data collected from annual
report of Everest bank Limited and few websites related to Nepal Stock exchange.
 The study majorly focuses on analysis of Risk and Return.
 Selected financial and statistical tools are used.
 There are 27 commercial banks in Nepal but the study is confined to Everest Bank
Limited with comparative reference of NABIL bank as well.
3.4. Ethical considerations
 Ethical considerations will be considered while doing this research work.

 The research will be completely based on reliable data sourced from the reliable
reports and website.
 There will no misrepresentation of financial information collected from the records of
the banks
Chapter 4: Presentation and Data Analysis
This chapter represents the presentation and analysis of the data collected for the study of
risk and return of Everest Bank. In order to analyse the risk and return of the selected
bank, Nabil Bank which is one of the leading commercial banks in Nepal has also been
analysed to make a comparative analysis between the selected banks however, the focus
of the study will be risk and return analysis of Everest Bank. The data collected in this
section represents data related to the Market price of the share, Cash and Stock dividend
distributed by the company, Earnings per share, Price to Earnings ratio which are collected
from relevant sources such as the annual reports of the company and various websites
which provides information related to the share price movement. The NEPSE index is
selected as the market index in this study. The collected data will be utilized to calculate
expected rate of return from the stocks and NEPSE Index, calculate the risk in terms of
standard deviation, calculate Systematic and Unsystematic risk of the stocks and calculate
the market sensitivity by using Beta Coefficient. Various charts and bar graphs are used in
the study to present the data in a systematic way.
4.1. Analysis of Market price per share, Earnings per share, Dividend and
P/E ratio of Everest Bank Limited
For Everest Bank (Table 4.1)
Dividend Earnings
Annual Market Price Cash Dividend on Dividend P/E
on share Per
Year (Closing) Dividend share value (Total) ratio
(%) share
2014/15 2120 5 30 1015.5 1020.5 78.04 27.17
2015/16 3385 0 70 947.1 947.1 40.33 83.94
2016/17 1353 0 33 218.79 218.79 32.48 41.66
2017/18 663 20 0 0 20 32.78 20.23
2018/19 666 20 5 33.75 53.75 38.05 17.5
2019/20 675 5.53 5 33.75 39.28 29.71 22.72
Note: Stock dividend per share = Dividend on share (%) x Market Price share of next year
as there is no proper model for the valuation of the stock dividend. Stock dividend per
share (2019/20) = Dividend on share (%) x Market Price share of 2019/20
For Nabil Bank (Table 4.2)
Dividend
Annual Market Price Cash Dividend on Dividend Earnings
on share P/E ratio
Year (Closing) Dividend share value (Total) Per share
(%)
2014/15 1910 6.84 36.84 863.5296 870.3696 57.24 33.37
2015/16 2344 15 45 685.35 700.35 59.27 39.55
2016/17 1523 18 48 442.08 460.08 59.86 25.44
2017/18 921 22 34 272 294 51.84 18.6
2018/19 800 22 34 260.1 282.1 50.57 15.82
2019/20 765 1.76 35.26 269.739 271.499 36.16 21.15
Source of data: Annual Report of Everest and Nabil Bank Limited

The table presented above represents the closing market price share, dividend paid,
earnings per share and Price to earnings ratio in each of the financial year selected for the
study. The data shows that both the companies has been consistently paying dividend to
its shareholder. The highest dividend paid by the Everest bank limited was in the financial
year 2014/15 and lowest dividend was paid in the year 2017/18. The payment of dividend
by Everest banks has been declining year by year. Focusing on the earning per share,
Everest bank had highest EPS in the year 2014/15 and has been declining since then
showing a negative growth in EPS in recent years. The Price to earnings ratio of Everest
Bank was highest in the year 2015/16 and has declined thereafter showing a negative
trend till 2018/19. The market share price of Everest bank was highest in the financial year
2015/16 and has been sharply declining since then indicating a negative trend in the
market price of share.
In comparison to the Everest Bank, Nabil bank limited has distributed highest dividend in
2014/2015, however, the dividend payment after 2014/15 for Nabil bank shows declining
trend. From 2014/15 to 2019/20, the highest market share price of Nabil Bank was 2344
which was achieved in 2015/16 since then the share price has shown declining trend. The
earnings per share for the Nabil Bank reached highest in 2016/17 and since then the
Earnings per share has declined. The Price to Earnings ratio for Nabil Bank jumped to
highest in 2015/16 but declined thereafter.
Market Price movement over the years

4000
3500 3385
3000
2500 2344
2120
2000 1910
1523
1500 1353
1000 921
800
663 666 675 765
500
0
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Everest Bank- Market Price Nabil Bank- Market Price
Figure 4.1
The above figure indicates the graphical representation of the share price movement over
the years which shows declining trend.
4.2. Analysing Standard Deviation, Expected Return, Coefficient of

Variation and Variance for Everest and Nabil banks
For Everest Bank (Table 4.3) (Appendix attached)

Annual Market Dividend Annual Return = (Annual (Annual Return –
Year Price (Total) ((P(t) – P(t-1) Return – Expected Return)2
(Closing) +D(1))/P(t-1) Expected
Return)
2014/15 2120 1020.5 0.193652604 0.132931247 0.017670716
2015/16 3385 947.1 1.043443396 0.982722039 0.965742606
2016/17 1353 -
218.79 -0.535660266 0.35567104
0.596381623
2017/18 663 -
20 -0.495195861 0.309043953
0.555917218
2018/19 666 53.75 0.085595777 0.02487442 0.000618737
2019/20 675 39.28 0.072492492 0.011771135 0.00013856
0.364328142 1.648885613
Expected Return = 0.060721357

Variance = 0.329777123
Standard Deviation = 0.574262242
Coefficient of Variation (CV) = 9.457335443
As per the analysis of Table 4.3, the annual return of Everest Bank from the financial year
2014/15 to 2015/16 has shown positive trend and the highest annual return was in the
year 2015/16 but the financial year 2016/17 and 2017/18 has been tough year for the bank
as there was negative return from these two financial year. The average return for the past
six years which is represented by Expected return in terms of ratio is 0.3643 while the total
risk measured by the standard deviation is 0.5742. Coefficient of variation measures the
per unit risk and as per the above analysis the to get one unit of return 9.457335443 risk
must be taken.
Annual Return (In Ratio)

1.2
1 1.04
0.8
0.6
0.4
0.2 0.19
0.09 0.07
0
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
-0.2
-0.4
-0.54 -0.5
-0.6
-0.8
Everest Bank
Figure 4.2
As per the analysis of figure 4.2, which is the line graph representing the ratio of annual
return for the Everest Bank indicates that the common stock of Everest Bank gave positive
return from 2014/15 to 2015/16 and negative return from 2016/17 to 2017/18. The annual
return in last two years have stabilized and is positive. The highest return in terms of ratio
achieved during the selected period was 1.043 and the lowest return was found to be –
0.5357 which was in 2016/17.
(Annual (Annual Return –
Market
Annual Dividend Annual Return = Return – Expected Return)2
Price
Year (Total) ((P(t) – P(t-1) Expected
(Closing)
+D(1))/P(t-1) Return)
2014/15 1910 870.3696 0.096792742 -0.0374 0.0014
2015/16 2344 700.35 0.593900524 0.4597 0.2114
2016/17 1523 460.08 -0.153976109 -0.2881 0.083
2017/18 921 294 -0.202232436 -0.3364 0.1132
2018/19 800 282.1 0.174918567 0.0407 0.0017
2019/20 765 271.499 0.29562375 0.1615 0.0261
0.805027037 0.4367

Variance = 0.08733435
As per the Table 4.4, the annual return for Nabil bank from the financial year 2014/15 to
2015/16 has shown positive trend and the highest annual return was in the year 2015/16
but the financial year 2016/17 and 2017/18 has been tough year for the bank as there was
negative return from these two financial year. The expected return for Nabil Bank
represented in ratio is 0.13417 with risk of 0.295523858 as represented by standard
deviation. The coefficient of variation represents the per unit risk which indicates that for
one unit of return, the investor has to take risk of 2.202588316.
Annual Return (In Ratio)

0.7
0.6 0.59
0.5
0.4
0.3 0.3
0.2
0.17
0.1 0.1
0
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
-0.1
-0.15
-0.2 -0.2
-0.3
Nabil Bank
Figure 4.3
As per the line graph, which indicates the annual return for Nabil Bank, the highest return
was achieved in 2015/16 thereafter the return from the common stock of Nabil Bank
started declining and reached negative for the financial year 2016/17 and 2017/18.Further
in the financial year 2018/19 and 2019/20, the return from the common stock saw positive
growth and has been stable.
4.3. Comparison of risk and return of both the banks
Table 4.5
Banks Expected Standard Coefficient Comments
Return Deviation of Variation
Risk Return Risk per
unit of
return
Everest 0.06072135 0.574262242 9.45733544 High Low High
Bank 7 3
Nabil 0.13417117 0.295523858 2.20258831 Low High Low
Bank 3 6
As per the table 4.5, the return for Nabil Bank is higher than that of Nabil Bank. The risk
represented by the standard deviation is higher for the Everest bank while Nabil bank has
low risk in comparison to the Everest bank. Everest bank has high risk per unit of return
while the per unit risk for the investment in Nabil bank is lower in comparison to the
Everest Bank. Thus, the analysis indicates that Everest bank has high total risk as well as
high risk per unit of return but low return while Nabil Bank has low risk, high return which
makes it better option for investment than the Everest Bank.
Risk, Return and Coefficient of Variation

10 9.46
9
8
7
6
5
4
3
2.2
2
1 0.57
0.06 0.13 0.3
0
Everest Bank Nabil Bank
Expected Return Standard Deviation Coefficient of Variation
Figure 4.5
As explained in the 4.5, the above bar graph shows the graphical representation of risk,
return and Coefficient of Variation from both commercial banks which clearly shows that
Everest bank has higher risk, lower return while Nabil Bank has low risk and higher return.
4.4. Comparing the risk and return with the market
The stock market in Nepal is represented by ‘The Nepal Stock Exchange Limited’
popularly known as NEPSE. The overall movement in the market is represented by the
NEPSE Index. The market return, risk and coefficient of variation is shown by the table
below:
(Table 4.5)
Annual Index Annual Return = ((P(t) (Annual (Annual
Year Closing – P(t-1) +D(1))/P(t-1) Return – Return –

Price Expected Expected
Return) Return)2
2014/15 961.23 -0.072270319 -0.1594 0.02541483
2015/16 1,718.15 0.787449414 0.7003 0.49041929
2016/17 1,582.67 -0.078852254 -0.166 0.02755674
2017/18 1,212.36 -0.233978024 -0.3211 0.1031232
2018/19 1,259.01 0.03847867 -0.0487 0.0023689
2019/20 1,362.34 0.082072422 -0.0051 2.5782E-05
0.522899908 0.648908744

Variance = 0.129781749
The data represented by the above tables indicates the annual return, Expected Return,
Standard deviation and Coefficient of Variation of NEPSE Index which the market index.
The annual return from the market has not been good in 2014/15, 2016/17 and 2017/18,
where the market return has been negative while in 2018/19 and 2019/20, the market
return has shown positive movement. The Expected return of the market is 0.087149985
while the risk in the market represented by the standard deviation is 0.36025234. The
coefficient of variation for the index is 4.133705146 which represents the risk per unit of
return.
Annual Return (In Ratio) of Market, Everest bank and Nabil Bank
1.2
0.8
0.6
0.4
0.2
0
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
-0.2
-0.4
-0.6
-0.8
Everest Bank Nabil Bank Market
Figure 4.6
The line graphs above represent the annual return of market and both the commercial
banks. As per the line graphs, for the year 2014/15 and 2015/16, Everest bank has
provided better return than market, while for the year 2016/17 and 2017/18, Everest bank
has performed poorly with respect to the market return. Nabil bank has performed better in
2014/15 in comparison to the market while in 2015/16, Nabil bank return was slightly lower
than the market return while from 2017/18 to 2019/20 Nabil bank has outperformed the
market with respect to the return.
Table 4.6
Expected Standard Coefficient of Return Risk C.V
Return Deviation Variation
(C.V)
Everest 0.060721357 0.574262242 9.457335443 Lower Higher Higher
Bank than than than
market marke market
t
Nabil 0.134171173 0.295523858 2.202588316 Higher Lower Lower
Bank than than than
market marke market
t
Market 0.087149985 0.36025234 4.133705146
As per the Table 4.6, which indicates the comparison of both banks with the market with
respect to expected return, standard deviation and coefficient of variation. From the
analysis of the above table, Everest banks has lower return, higher risk and higher
coefficient of variation in comparison to the market while Nabil bank has higher return,
lower risk and lower coefficient of variation in comparison to the overall market. So,
Everest Bank has underperformed and Nabil Bank has outperformed the market with
respect to total risk, return and coefficient of variation.
4.5. Sensitivity Analysis
The beta Coefficient measures the sensitivity of the stock in relation to the market. If the
beta coefficient is high, it represents greater sensitivity of the stock in relation to the market
movement and vice-versa.
A B
Annual Return of market Annual Return of stock -
Annual Year
- Mean of Market return Mean of the stock return A*B
2014/15 -0.159420304 0.132931247 -0.02119194
2015/16 0.700299429 0.982722039 0.688199683
2016/17 -0.166002239 -0.596381623 0.099000684
2017/18 -0.321128009 -0.555917218 0.17852059
-
2018/19
-0.048671315 0.02487442 0.001210671
2019/20 -0.005077563 0.011771135 -5.97687E-05
0.943258578
Cov (Rm, Rj) = 0.188651716

Beta Coefficient = 1.453607441
The beta coefficient of Everest Bank is greater than 1 which indicates that the stock is
highly sensitive to the market. Thus, Everest Bank stock is highly volatile in relation to the
market and riskier for investment.
A B
Annual Return of
Annual Year Annual Return of market - stock - Mean of the A*B
Mean of Market return stock return
2014/15 -0.159420304 -0.037378431 0.006
2015/16 0.700299429 0.459729351 0.3219
2016/17 -0.166002239 -0.288147282 0.0478
2017/18 -0.321128009 -0.336403609 0.108
2018/19 -0.048671315 0.040747394 -0.002
-
2019/20
-0.005077563 0.161452577 0.0008
0.481
Cov(Rm, Rj) = 0.096193157

As per the table 4.8, the beta coefficient is less than 1, which indicates that Nabil Bank has
less sensitivity in relation to the market movement. Thus, Nabil Bank is less volatile in
relation to the market.
Table 4.9
Banks Beta Coefficient Comments
Everest Bank 1.453607441 Risky as more
volatile
Nabil Bank 0.741191713 Less risky as less
volatile
The above table indicates the beta coefficient of Everest and Nabil bank. From the
comparison of beta coefficient of both the banks, it can be observed that the Everest Bank
is riskier investment than the Nabil Bank, since the beta coefficient of Everest is higher
than Nabil Bank and is greater than one.
4.6. Analysis of Systematic and Unsystematic Risk
Systematic Risk = Beta Coefficient of the stock * Standard deviation of the market
Unsystematic Risk = Total Risk represented by the standard deviation of the stock –
Systematic Risk
For Everest Bank
Systematic Risk = 1.453607441 x 0.36025234 = 0.5237
Unsystematic risk = 0.5743 - 0.5237 = 0.0506
Percentage of Systematic Risk = Systematic Risk/Total Risk = 0.5237/0.5743 = 91.19%
Percentage of Unsystematic Risk = 8.81%
For Nabil Bank
Systematic Risk = 0.741191713 x 0.36025234 = 0.2670
Unsystematic risk = 0.2955 - 0.2670 = 0.0285
Percentage of Systematic Risk = Systematic Risk/Total Risk = 0.2670/0.2955 = 90.36%
Percentage of Unsystematic Risk = 9.64%
4.6. Analysis of Correlation between Market, Nabil Bank and Everest

Bank
Table 4.10 (Appendix attached)

Everest Bank Nabil Bank Market
Everest Bank 1 0.952917758 0.911892589
Nabil Bank 1 0.903534663
Market 1
Source: Self-Created
The above table shows the correlation between the Market, Nabil bank and Everest Bank.
The above correlation matrix shows positive correlation of the two banks with the market.
4.7. Expected rate of return, Required rate of return and Evaluation of

Price
As per the Capital Asset Pricing Model,
Required rate of return = Risk free rate + Risk premium, and risk is measured by Beta
coefficient.
In this study risk free rate is the Weighted Average Treasury Bill rate 364 day which is
3.86% for the financial year 2019/20 as per the rates issued by the Nepal Rastra bank.
Evaluation of price using the required rate of return and expected rate of return
Required rate of return = Risk free rate + Beta (Market return - Risk free rate)
Table 4.11
Risk free Market Beta Required Expected Comment on the
rate of return Coefficient rate of rate of price
return return return
Everest 0.0386 0.0871 1.4536 0.109 0.0607 Over-Priced
Bank
Nabil 0.0386 0.0871 0.7411 0.07454 0.13417 Under-Priced
Bank
As per the table above, if the required rate of return is higher than the expected rate of
return, then the stock is overpriced and Vice-versa. In this case Everest bank is over
priced and Nabil bank is Under-Priced since Everest Bank’s required rate of return is
higher than its expected rate of return and Nabil bank’s required rate of return is lower than
expected rate of return.
4.8. Important Findings from the Study
The Nepalese stock market is moving towards the liberalization; however, the investors
lack vital information as well knowledge for analysing the stock market. The findings of this
study are as follows:
 The income earned from the stock is the return from the stock which can be
represented in percentage. The expected return on the stock of Everest bank is
6.07% and expected return of Nabil bank is 13.42% which is analysed in this study
in order to provide a comparative study. The expected return for the market i.e.,
NEPSE index is 8.71%
 In this study, Standard Deviation measures the total risk of the stocks of selected
banks. As per the result, the standard deviation of Everest Bank is 0.574262242
while the Standard deviation of Nabil bank is 0.295523858. This shows that Everest
bank which is the focus of the study has higher risk while comparing it to another
leading commercial bank like Nabil Bank Limited. When it comes to investment
decision, Coefficient of variation is more rational approach to measure the risk as it
defines the risk in terms of per unit of return. The Coefficient of variation for Everest
bank is 9.457335443 and for Nabil Bank is 2.202588316. So, Coefficient of variation
is high for the Everest bank which makes it riskier.
 Beta coefficient is the measurement of market sensitivity i.e., it measures stock
volatility with respect to market movement. So, if the beta is high or greater than 1,
then it can be said that the stock is highly volatile in relation to the market
movement. The beta coefficient of Everest Bank is greater than 1 which is
1.453607441 and the beta coefficient for Nabil bank is 0.741191713, thus, it can be
said that Everest bank is more volatile stock than Nabil Bank. So, the Everest Bank
is riskier investment.
 Systematic and Unsystematic risks are the two risks which are also analysed in this
study. The systematic risk is related to the market risk and cannot be diversified
while unsystematic risk can be diversified. The proportion of systematic risk in
Everest Bank is 91.19% and unsystematic risk is 8.81% while in case of Nabil bank
the systematic proportion is 90.36% and Unsystematic risk is 9.64%. From this
analysis it can be said that Everest bank has high systematic risk than Nabil bank
and such risks cannot be diversified so, Everest bank can be considered riskier.
While unsystematic risk is higher in Nabil bank and lower in Everest bank but such
risk can be diversified by using efficient internal control.
 In this study, the comparison between required rate of return and expected rate of
return as per the CAPM model is used to derive whether the stock under priced or
over-priced. As per the analysis, the stock of Everest Bank Limited is overpriced
since Everest Bank’s required rate of return is higher than its expected rate of return
and Nabil bank’s required rate of return is lower than expected rate of return.
Chapter 5: Conclusion and Recommendation
The investors in Nepal lack knowledge related to analyzing the securities due to lack of
information and understanding of stock return and risk. This study is an attempt to provide
an analysis of the risk which the investor is willing to take and return that the investor is
expecting. The study relates to the risk and return analysis of the stock of Everest bank
with comparison with Nabil Bank and the overall market. The study has been done using
the financial information from 2014/15 to 2019/20 by using the secondary data collection
method. As per the study conduct the expected rate of return of Everest bank is 6.07%
and expected return of Nabil bank is 13.42% while the market has provided expected rate
of return of 8.71%. Thus, Everest bank has underperformed in comparison to the market
and the Nabil bank. Further, the study sheds light on the risk which is higher in the Everest
bank and lower in Nabil bank since the standard deviation is higher in case of Everest
bank. So, from the perspective of risk and return analysis, Everest Bank has high risk and
low return and even the risk per unit of return represented by the coefficient of variation is
higher. So, investing in the Everest Bank is not viable from the investment perspective as it
has high risk but low return. Also, the proportion of systematic risk in Everest Bank is
higher and such risk cannot be diversified which makes Everest bank riskier investment
option. The study has also identified whether the stock of Everest bank is over-priced or
under-priced. The stock of Everest bank is over-priced as per the CAPM model since its
required rate of return is higher than its expected rate of return. In case of Everest Bank
there is no risk and return trade-off as high risk has not resulted in high return in this case.
The study has also analysed the market price per share and Earnings per share of Everest
and Nabil Bank and the results suggests that when the Earnings per share has declined, it
has impacted the market price per share as well in both the banks. Thus, showing the
positive relation between earnings per share and market price per share.
Recommendations
 The study shows the significance of the risk and return of common stocks with
reference to selected commercial banks. The investors should consider the risk and
the return factor while making any investment and coefficient of variation can be
used as more efficient way to measure the risk of stocks as it indicates risk per unit
of return. On the basis of coefficient of variation Everest Bank is more risky
investment with low return but Nabil bank is less risky with high return. So, if an
investor wants to invest in any of these banks, he/she should consider Nabil Bank.
 Investor should also consider the Beta coefficient while considering the investment.
The investor should invest in stocks with low beta as such stocks are less risky
since they are less volatile in relation to the market. In the study Everest bank has
high beta, so it is more volatile and riskier.
 It is also necessary to understand that the impact of systematic and unsystematic

risk present in the stocks. Systematic risk cannot be diversified while unsystematic
risk can be diversified. So, it is recommended to select stocks that have less
systematic risk and investor can afford more unsystematic risk as it can be
diversified. Everest Bank has higher proportion of systematic risk in comparison to
the Nabil bank. So, looking at the combination of systematic and unsystematic risk,
Nabil bank is suitable option for investment in comparison to Everest Bank.
 The investors should also consider the pricing of the stock whether the stock is
over-priced or under-priced. If the required rate of return is higher than the expected
rate of return, the stock can be said to be overpriced and vice versa. In this study,
Everest bank is overpriced and Nabil bank is under-priced. So, Investors should be
avoiding Everest bank for investment.
 The earnings per share is another factor for analyzing the stock returns as it
represents the income earned per share. Everest Bank has lower earnings per
share in comparison to Nabil Bank. So, it is recommended for investors to invest in
stocks with higher earnings per share.
 The company should provide and communicate the financial information on regular
intervals without manipulating the facts so the risk and return analysis can be more
accurate.
 The current Nepalese stock market is highly focused on the banking and financial
stocks which requires amendment so that various stocks from other industry should
also be promoted so that investor can diversify the risk.
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Websites used for data:
http://www.nepalstock.com/
https://www.sharesansar.com/company/ebl
http://nepalstockinfo.com/nepse-index
Appendices

Annual Market Dividend Annual Return = (Annual (Annual Return –
Year Price (Total) ((P(t) – P(t-1) Return – Expected Return)2
(Closing) +D(1))/P(t-1) Expected
Return)
2014/15 2120 1020.5 0.193652604 0.132931247 0.017670716
2015/16 3385 947.1 1.043443396 0.982722039 0.965742606
2016/17 1353 -
218.79 -0.535660266 0.35567104
0.596381623
2017/18 663 20 -0.495195861 - 0.309043953
0.555917218
2018/19 666 53.75 0.085595777 0.02487442 0.000618737
2019/20 675 39.28 0.072492492 0.011771135 0.00013856
0.364328142 1.648885613
Expected Return = Sum of annual return/ Number of observations(n) = 0.060721357

Variance = Sum of (Annual Return – Expected Return) 2/ (n-1) = 0.329777123
Standard Deviation = (Variance)1/2 = 0.574262242
Coefficient of Variation (CV) = Standard Deviation/ Expected return = 9.457335443
Here, P(t) = Market price of share in current year, P(t-1) = Market price of previous year
and D1 = Dividend in the current year.
(Annual (Annual Return –
Market
Annual Dividend Annual Return = Return – Expected Return)2
Price
Year (Total) ((P(t) – P(t-1) Expected
(Closing)
+D(1))/P(t-1) Return)
2014/15 1910 870.3696 0.096792742 -0.0374 0.0014
2015/16 2344 700.35 0.593900524 0.4597 0.2114
2016/17 1523 460.08 -0.153976109 -0.2881 0.083
2017/18 921 294 -0.202232436 -0.3364 0.1132
2018/19 800 282.1 0.174918567 0.0407 0.0017
2019/20 765 271.499 0.29562375 0.1615 0.0261
0.805027037 0.4367

Variance = 0.08733435
For NEPSE Index (Table 4.5)
Annual Index Annual Return = ((P(t) (Annual (Annual
Year Closing – P(t-1) +D(1))/P(t-1) Return – Return –
Price Expected Expected
Return) Return)2
2014/15 961.23 -0.072270319 -0.1594 0.02541483
2015/16 1,718.15 0.787449414 0.7003 0.49041929
2016/17 1,582.67 -0.078852254 -0.166 0.02755674
2017/18 1,212.36 -0.233978024 -0.3211 0.1031232
2018/19 1,259.01 0.03847867 -0.0487 0.0023689
2019/20 1,362.34 0.082072422 -0.0051 2.5782E-05
0.522899908 0.648908744

Variance = 0.129781749
A B
Annual Return of market Annual Return of stock -
Annual Year
- Mean of Market return Mean of the stock return A*B
2014/15 -0.159420304 0.132931247 -0.02119194
2015/16 0.700299429 0.982722039 0.688199683
2016/17 -0.166002239 -0.596381623 0.099000684
2017/18 -0.321128009 -0.555917218 0.17852059
-
2018/19
-0.048671315 0.02487442 0.001210671
2019/20 -0.005077563 0.011771135 -5.97687E-05
0.943258578
n=6
Market Variance = 0.129781749
Covariance Between market return and Stock return = (A x B)/n-1 = 0.188651716
Beta Coefficient = Covariance/ Market Variance = 1.453607441
A B
Annual Return of
Annual Year Annual Return of market - stock - Mean of the A*B
Mean of Market return stock return
2014/15 -0.159420304 -0.037378431 0.006
2015/16 0.700299429 0.459729351 0.3219
2016/17 -0.166002239 -0.288147282 0.0478
2017/18 -0.321128009 -0.336403609 0.108
2018/19 -0.048671315 0.040747394 -0.002
-
2019/20
-0.005077563 0.161452577 0.0008
0.481
Covariance Between market return and Stock return = 0.096193157

Correlation between Everest Bank and Nabil Bank

A B
Everest Bank - Nabil -

(Annual (Annual
Return – Return –
Financial Expected Expected
Year Return) Return) A X B
2014/15 0.132931247 -0.03738 -0.004968761
2015/16 0.982722039 0.459729 0.451786165
2016/17 -0.596381623 -0.28815 0.171845744
2017/18 -0.555917218 -0.3364 0.187012558
2018/19 0.02487442 0.040747 0.001013568
2019/20 0.011771135 0.161453 0.00190048
0.808589754
n=6
Covariance = (A x B)/n-1
Correlation = Covariance / Standard deviation of Nabil bank x Standard deviation of
Everest Bank
Correlation between Everest Bank and Market

A B
Market-
(Annual
Return –
Expecte
Financial Everest d
Year Bank - Return) A X B
0.13293124
2014/15 7 -0.15942 -0.02119
0.98272203
2015/16 9 0.700299 0.6882
-
0.59638162 0.09900
2016/17 3 -0.166 1
-
0.55591721 0.17852
2017/18 8 -0.32113 1
2018/19 0.02487442 -0.04867 -0.00121
0.01177113
2019/20 5 -0.00508 -6E-05
0.94325
9
Covariance 0.188652
Correlation 0.911893
Correlation between Nabil and Market

A B
Financia Nabil - Market- A x B
l Year (Annua (Annua
l l
Return Return
– –
Expect Expect
ed ed
Return) Return)
- - 0.0059588
2014/15 0.03738 0.15942 81
0.45972 0.70029 0.3219482
2015/16 9 9 02
- 0.0478330
2016/17 0.28815 -0.166 94
- 0.1080286
2017/18 -0.3364 0.32113 21
-
0.04074 - 0.0019832
2018/19 7 0.04867 29
-
0.16145 - 0.0008197
2019/20 3 0.00508 86
0.4809657
83
Covarian 0.09619
ce 3
Correlati 0.90353
on 5
Contact Type Date Feedback Signature

Face-to-face, Please record outcome of meetings Supervisor Student
on-line etc. making specific notes on agreed
actions to be completed.
Explained about the topic that I
Face-to-face 03 choose and Giving the clear

February definition of customer satisfaction
2021 with proper index citation.
15 Problem should be defined clearly.

February What is the problem and how this
Email
2021 problem is affecting the company or
whether it is influencing in positive or
negative way?

telephone etc. making specific notes on agreed
Telephone 28 Literature review part should be

February connected to all the chapter and
2021 explain all the points in detail
information.
Face-to-face 12 Proper research methodology should

March be used to get the proper data. The
2021 research should be focused to get
reliable data through survey,
interview, etc.
(Note: Interview method has not
included in this thesis)

telephone etc. making specific notes on agreed
Email 01 April Data interpretation should be Up to

2021 Date and the data question should be
realistic and have proper detailed
about the data that is included in the
thesis. Unreliable data or sources
having unreliable data should be
avoided.
telephone 20 April Proper intext citation should be done

2021 and the thesis should be free from
plagiarism and all the saying of author
should be quoted and citied. All the
sentences should be paraphrased. No
academic misconduct should be there.
Form 2
Ethics proposal form for (Level Six) Undergraduate written projects, Independent Study,
Business and community link, and Master’s dissertations.
2019/20
You should read the University Ethics Guidance before filling in this form. This is available
from: https://www.wlv.ac.uk/research/research-policies-procedures--guidelines/ethics-
guidance/. Once completed fully, please submit this form to your supervisor for the project
you are undertaking. Once the supervisor has approved and signed it, you must append a
copy to your project placed as appendix A. Please note that this permission is only
concerned with ethical issues and does not indicate anything about the intellectual merit of
your project.
Please type details into the form.
1. Name: Kisan Bhagat

2. Student number: 2040721
3. Email address (this must be your University email address): N.Chaudhary3@wlv.ac.uk
If this is a group project, please list ALL other students involved. (Full names and student
numbers):
4. Subject to which the study will contribute: Case Study of Amazon India: Customer
Satisfaction Level in Supply of Food Products.
5. Name of supervisor: Dr. Rishikesh Wagle
7. Module Code and Title: 6BU013 (Independent Projects)

8. Project Title: Case Study of Amazon India: Customer Satisfaction Level in Supply of
Food Products.
9. I confirm that I have: (Tick to confirm)

√
a. Discussed my research with my supervisor.
b. Read the Guide to Ethics and consulted the

Ethics Guidance √ Web pages
9. Which category does your project fall?

Tick as applicable:
Category 0
 Research that does not involve human subjects or raise any
ethical concerns.
Category A
 Research that involves human subjects that are considered
not to cause any physical or psychological harm.
Category B
(Note: Undergraduate and Taught Masters students are not
normally permitted to
undertake Category B research).
 Research that may be considered likely to cause physical or

psychological harm.
 Research that may be contentious and/or risks bringing the
University into disrepute.
 Research that requires accessing confidential data.
 Research that involves individuals considered to be
vulnerable.
10. Does your study involve any of the following?

(Please tick ALL that apply.)
Making video/DVD
Making audio recording
Observation of human subjects √
Participant observation √
Telephone and/or Email contact with individuals or organizations
Interviews (structured/ semi-structured/un-structured)
Questionnaires (including on-line questionnaires) √
Access to confidential information
Contact with minors (anyone under the age of 18) √
Contact with other vulnerable people (e.g. victims of crime, the
recently bereaved)
Research about a controversial issue √
Other: please specify (e.g. will your finished project be accessible to the public outside the
university?)
11. Brief outline of project.

This thesis consists about the case study about the Amazon India in customer level
satisfaction. This thesis includes the problem that Amazon India is facing and giving some
recommendation. The survey is done according to questionnaire method with respondent
of 50 participants. The literature review part has clearly defined the term and terminology
of the points.
Expand, as necessary.
12. Methodology.
This should include an indication of:
 Your objective in gathering primary data from participants.
 The participants are identified through questionnaire method.
 The number of research participants were 50.
 A sample of questions if conducting either interviews or questionnaires. (sample
questions are in appendix)
13. Ethical Issues

Amazon India is facing the decline of profit due to Covid-19. Some customer faces
problems like expectations vs reality, delay in services, internet issues and many more.
But overall, the performance of Amazon India is satisfied ones. The company is in raising
state. The data are also protected by the company.
14. Is ethical approval required by an external agency/parents?

There is not such type of ethical approvements.
15. Is a DBS check required?

This may be required if the research involves vulnerable groups and/or anyone under
the age of 18.
If yes, please attach your disclosure letter.
Student Signature Kisan Bhagat

Date: 2021/04/05
Name of Supervisor Dr. Rishikesh Wagle

Approval Signature of Supervisor
Date:

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6BU013 Independent Project 2040721

ANALYSIS OF RISK AND RETURN FROM COMMON STOCK OF

Module: - 6BU013 Independent Project.

Year: 2021 Level: level- 06

Submitted to: University of Wolverhampton

4.5. Sensitivity Analysis...................................................................................................................................21

1.1. Research Background

1.1.1. Banking Sector History in Nepal

1.1.2. Brief profile of Everest Bank

1.2. Significance of the Study

 Significance to the management: Management in any organization is committed

 Significance to the promoters and shareholders: The promotors and the

 Significance to the Government: Financial Institutions like banks are the

1.3. Statement of Problem

 To identify whether the stock of the selected bank is overpriced, under-priced, or at

Chapter 2: Literature Review

2.5. Understanding Earnings per Share (EPS)

systematic risks cannot be fully eliminated as it is market-related, so, it is better to have a

2.9. Relation between Risk and Return

2.11. Risk Measurement

 Beta Coefficient: Beta is the measurement of the volatility of the stock. It

 Coefficient of variation: Coefficient of variation is a statistical tool to measure risk

 Correlation Coefficient: This statistical tool measures the degree of relationship

2.12. Gap Analysis

Chapter 3: Research Methodology

Population and sample:

 The study focuses on financial information from 2014/15 to 2019/20 only.

3.4. Ethical considerations

 Ethical considerations will be considered while doing this research work.

Chapter 4: Presentation and Data Analysis

For Everest Bank (Table 4.1)

2015/16 2344 15 45 685.35 700.35 59.27 39.55

2016/17 1523 18 48 442.08 460.08 59.86 25.44

2017/18 921 22 34 272 294 51.84 18.6

2018/19 800 22 34 260.1 282.1 50.57 15.82

2019/20 765 1.76 35.26 269.739 271.499 36.16 21.15

Source of data: Annual Report of Everest and Nabil Bank Limited

Market Price movement over the years

Everest Bank- Market Price Nabil Bank- Market Price

4.2. Analysing Standard Deviation, Expected Return, Coefficient of

For Everest Bank (Table 4.3) (Appendix attached)

Expected Return = 0.060721357

Annual Return (In Ratio)

Expected Return = 0.134171173

Annual Return (In Ratio)

4.3. Comparison of risk and return of both the banks

Risk, Return and Coefficient of Variation

Expected Return Standard Deviation Coefficient of Variation

4.4. Comparing the risk and return with the market

Year Closing – P(t-1) +D(1))/P(t-1) Return – Return –

Expected Return = 0.087149985

Everest Bank Nabil Bank Market

4.5. Sensitivity Analysis

Cov (Rm, Rj) = 0.188651716

For Nabil Bank (Table 4.8)

Cov(Rm, Rj) = 0.096193157

4.6. Analysis of Systematic and Unsystematic Risk

4.6. Analysis of Correlation between Market, Nabil Bank and Everest