Risk and Return Analysis: A Comparative Study of Commercial Banks in Nepal

Abstract

Risk, in simple wont, is an uncertainly, Risk and uncertainties are the .facts of life so to the common stockholders. Technically, their meaning' are different. Risk, simply in investment, means a chance of happening some unfavorable event or danger of losing some value. Risk suggests that a decision maker known the possible consequences of a decision and their relative livelihoods at the limes he makes decision. In other, uncertainty is simple a lack of definite outcomes, its anything that could happen-any unknown event, which may be favorable, or unfavorable on the other hand. Uncertainty involves a situation about which the likelihood of the possible outcomes is not known. The trouble arises from the fact that despite different interpretation of uncertainty and risk, people often use them interchangeably. Although it is quite clear what precisely these two terms mean, authorities in the field of finance do agree that the risk is the product of uncertainty. Return better known or reward from an investment includes both current income and capital gain or loss that arises by the increase or decrease of the security price. Return is the income received on an investment plus any change in market price. Usually expressed as a percent of beginning price of the investment, the overall rate of return can be decomposed into two parts as capital appreciation and dividend. Capital appreciation is the difference between ending value and beginning value of an investment. Return is defined as the dividend yield plus the gain or loss. The relationship between different levels of return on their relative frequencies is called a probability distribution. The findings and results will be helpful to evaluate the strength and weakness of the sampled banks and industry. The recommendation is made to take a corrective action and decisions.