Chapter:3- Analysis of Return and Risk
Unit -1: Investment Environment
Ramesh Kumar
Department of Commerce
PGDAV College EVE
(University of Delhi)
Chapter:3- Analysis of Return and
Risk
[Link]
3.1.1 Return Meaning
3.1.2Types of Return
3.1.3 Return computations
3.1.4 Security and Portfolio Return
3.2 Risk
3.2.1 Meaning, causes and types of risk
3.2.2 Systematic and unsystematic risk
3.2.3 Types of Investor
3.2.4 Computation of risk
3.2.5 Expected Return (CAPM)
3.2.6 Impact of Taxes on Investment
3.2.7 Impact of Inflation on Investment return
Return Types
Average Return
Expected return
Portfolio return
Holding period return
Effective annualized return
Absolute return
Risk adjusted return
Return
Investment Attribute
1. Return
2. Risk
Return : Total income generated by investment expressed as
percentage of the cost of investment.
Income from Investment may be revenue income
Interest
Dividend
Capital gain
Return from financial assets
= income from asset + (selling price – purchasing price )
Risk and Uncertainty
Risk: a situation where we can assign some
probabilities to the expected outcome of an
event .
Uncertainty : it is not possible to predict at all
i.e. we cannot assign probability to the
expected outcomes of an event.
All rational investors like return but at the same time
dislike risk, hence all investors are risk averse
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Measurement of Risk
Calculate total risk:
Range
Variance
Standard Deviation
Coefficient of variation
Calculation of systematic risk
B- beta
Calculate Unsystematic risk
Types of Investors
• Risk averse Investors
• Risk Natural
• Risk Lover/ Risk seeker
Risk aversion and Different Investor
Utility Analysis and Indifference Curve
Reference Book
[Link] Tripathi, Security Analysis & portfolio
Management
[Link] ,Y.P. “Fundamentals of investment
3. Rustogi ,R.P. “ Fundamentals of Investment
[Link], P., “ Security Analysis and Portfolio
Management”
5. Donald E. Fisher,Ronald ,J. Jordan, Security Analysis and
Portfolio Management