Empirical studies in building the risk averse portfolio model
- Author C. Kanagaraj
- Co-Author Santhosh Raja R
- DOI http://wwj
- Country : India
- Subject :
Keywords : Risk Averse Portfolio Model, Portfolio Building, Portfolio Risk, portfolio return, systematic risk, unsystematic risk.
Abstract
The present research article aims at exploring the possibilities of building a portfolio with minimum risk. There are numerous articles and book written on portfolio models which could bring greater returns with minimum risk. The risk and return go hand in hand but as an investor one wants more return and less risk.
Almost all portfolio theories are against single stock investing. They suggest a portfolio stocks from unrelated sectors or industries to mitigate risk. There is no way to secure oneself from systematic risk in the field of investment, but a right portfolio could bring down unsystematic risk considerably. However, such portfolio building requires a lot of financial acumen and experience in using mathematical techniques a model. By keeping such difficulties in mind, a constant index portfolio model is proposed and empirically tested for a period of ten years to validate the model. In this model, stock selection for the portfolio is done by the index itself and even a novice in the field of investment could understand the model without much of difficulty.
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