Abstract

This concept note compares the risk-weighted returns generated by the BSE Sensex and bank fixed deposits during the period between March 1992 and March 2007. The objective of the note is to determine whether investment in Indian equities has generated superior risk-weighted returns as compared to fixed deposits over various time periods ranging between one year and fifteen years. It calculates average annualized returns, standard deviation and range of returns at different probabilities generated by BSE Sensex over fifteen year period. Finally, the coefficient of variation is determined across various time horizons to examine how much risk an investor has taken for an extra unit of return generated from the stock markets over bank fixed deposits. This concept note is designed for students of Finance curriculum and can be discussed with the chapter on Security Analysis and Portfolio Management. It can also be discussed in a training program for executives employed in broking firms and mutual fund companies.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

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Keywords

BSE Sensex, Risk and Return, Average Annualized Returns, Risk Weighted Returns, Standard Deviation, Coefficient of Variation, Portfolio Management, Security Analysis, Beta, Annual WPI Inflation, Dispersion, Volatility of Stock, Market Capitalization, Value at Risk, Confidence Level, Probability of Return, Range of Return, Bank Fixed Deposits, Yield to Maturity, Risk Free Return, Annualized Yield