PERFORMANCE OF PORTFOLIO BASED ON RISK AND RETURN

Performance of portfolio based on risk and return



Abstract

The purpose of the quantitative study was to compare the performance of stocks from Indian stock company Sharekhan with commodity futures during unexpected or expected inflationary periods. In the study, SPSS (Statistical Package for the Social Sciences) statistical software templates were employed to process and analyze data entered on the data collection form. The reason for selecting these three sectors was because the commodity futures in stock company Sharekhan correlation with expected inflation over the 1999 to 2009 period. one stock from a commodity company was selected from each of the three sectors based on two factors: (a) the stock that had a high amount of its revenues from the purchase and sale of physical commodities similar to the commodities futures selected in the study, and (b) stocks that had a high revenue on average during the study periods. Furthermore, the focus of the study was on the performance of stocks from commodity companies and commodity futures of sharekhan from 1999 to 2009. The longer sample period helped to ensure that the results were less sensitive to periods of unusual performance, which had plagued previous studies. Also, the longer sample period would allow for separate analyses across both expansive and restrictive monetary policy periods that are of sufficient length.

Table of contents

Abstract2

Chapter I4

Portfolio risk management4

Introduction4

Chapter II5

Literature review5

Chapter III32

Methodology33

Chapter IV:49

Findings49

Chapter V59

Summary, Conclusions, And Recommendations59

References65

Appendix75

Chapter I

Portfolio risk management

Introduction

Nowadays, the improvement of risk management systems becomes a crucial issue for financial institutions. The fundamental feature of risk management is an estimation of risk and control of its amount within a limited risk buffer. The assets exposed to risk, such as stocks, bonds, and loans are called risk assets. Risk assets sometimes fluctuate unpredictably but such fluctuations are mutually not independent, but correlated. (Preda, Alex 2009, 56-78)

The amount of risk corresponding to risk assets is measured by statistical methods such as Value-at-Risk. Based on the estimated risk, financial institutions have to reserve a capital with which the loss would be compensated when the riskis realized. As a capital, or a risk buffer, is limited, control of the total amount of risk and the allocation strategy of the risk buffer between risk assets to maximize earnings become important problems. In order to handle such problems the portfolio theory offers an established framework. (Preda, Alex 2009, 56-78) the methodology data is based on the indian stock broker sharekhan.

Chapter II

Literature review

The management of credit risk has three major dimensions-the transaction level credit decision, the management of the credit risk portfolio and value-added services.

The transaction level credit decision represents the traditional view of credit. The acceptance of a customer order and subsequent granting of credit initiates the acceptance of risk by the organization. The objective in managing individual credit transactions is largely to determine the risk-return tradeoff in granting credit to each customer. The risk tolerance or preferences of the organization are driven by a number of ...