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Risk and Return
Risk and Return
Risk and Return
( Pt − Pt −1 ) + Div
Ri =
Pt −1
Where, Pt is price of security in time period t, Pt-1 is
price in last time period, Div is dividends.
Return Calculation
Reliance Ind.
Time Opening Price Closing Price Div.
May-07 1752.0 1760.0 10.0
Forex Risk
Systematic Risk
Market Risk-Market risk refers to that portion of total variability in the
return caused by factors affecting the whole market. Economic,
political and sociological changes are sources of this type risk.
Market risk can not be diversified by enlarging the portfolio. This risk
affects the market as a whole and each stock seems to co-vary in the
same direction with the emergence of this risk.
Unsystematic Risk
Business Risk- Business risk, emerges because of operating
conditions, variability in business conditions, dividend decisions
etc.
N
Portfolio Risk = σp =∑wiσi
i =1
N
Portfolio Market Risk=
σp = ∑wi βi
i =1
Portfolio Return and Risk
Total Fund=1,00,000
SBI ABB TCS Wipro Infosys
Return 2% 3% 2% 5% 6%
Risk (Stdev) 2 4 3 2 3