Risk and Return Analysis of Sectoral Indices in the context of the Bombay Stock Exchange

Abstract

For an investor, in deciding on the investment, risk and return plays an important role. The risk and return are interrelated. Usually, if the return is small, the bet will also be low and the higher risk will be associated with a higher return. Investments in stock markets are risky, as was observed in the performances of several assets. Therefore, it is up to investors what level of risk could be a beard to getting the desired return. Thus, risk and return analysis should be performed before making investments for more thoughtful decisions. In the present study, an attempt is made to analyze and compare the risk and return relationship in the context of the Bombay Stock Exchange using the data of selected Sectoral Indices listed in the S&P BSE 500 Index. The results revealed that the Indices with higher returns had low risk. In comparison, the Indices with lower returns had a higher risk, showing a weak negative linear relationship between the two variables. It was also obtained that there is no significant difference between the Market returns and the monthly returns of the Indices.