International Journal of Engineering and Management Research (IJEMR)
Year : 2017, Volume : 7, Issue : 4
First page : ( 377) Last page : ( 379)
Print ISSN : 2394-6962. Online ISSN : 2250-0758.

Portfolio Risk Management using Capital Asset Pricing Model

Bihani Navneet, Khandelwal Somya

Indian Institute of Technology, Delhi, India

Online published on 31 October, 2017.

Abstract

Intricacies involved with a particular industry are revealed by risk and return analysis only. It is very important to decide the amount of risk one can take so as to remain comfortable with their investment. Closely visiting these ideas throws light on a clear understanding and facilitates in decision making about any investment. One seeks to achieve correct balance between risk and return to arrive at maximum optimization while going for any investment. A fact that remains is that risk and return always go together in investments. Everything and anything an investor does is tied directly or indirectly to return and risk. Their objective is to maximize expected returns from the investments, with the existing constraints. Return being the motivating force, inspires investors in the form of rewards for undertaking the investment. The importance of returns in any investment decision can be linked to many factors: enables investors to compare alternative investments in terms of what they have to offer, helps in measuring of historical returns to assess how well they have done and facilitates in measuring of the historical returns for estimation of future returns.

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Keywords

Capital Asset Pricing Model (CAPM), Expected Return, Risk, Beta for stock, Investment, Portfolio.

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