A Comparison of Risk and Return Between BSE Sensex and Bank Fixed Deposits


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:

Case Code : FINC059 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Portfolio Management / Security Analysis
Case Length : 17 Pages
Period : 1994-2008
Pub. Date : 2009
Teaching Note : Not Available
Organization : Bombay Stock Exchange
Industry : Financial Services
Countries : India

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.

Contents:

  Page No.
Introduction 1
Returns from Stock Markets 1
Returns from Fixed Deposits 7
Exhibits 11

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

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