Risk and return analysis of common stock investment (special reference to Nepalese Joint Venture Banks)
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Abstract
This study analyses thevriskvandvreturnvof joint venturevcommercialvbanksvin
Nepal. The study has identified rate of return (Rj), common stock’s expected
return E(Rj), standard deviation (σ), coefficient of variance (CV), covariance,
correlation coefficient and coefficient of beta (β) to analyze the data. The study has
selected Nepal Nepal SBI Bank Limited, Standard Chartered Bank Nepal Limited,
NABIL Bank Limited, Himalayan Bank Limited, Everest Bank Limited and Nepal
Investment Mega Bank Limited for the purpose of the study.
The results the risk per unit as indicated by coefficient of variation of the joint
venture banks is higher for the than the market index. Hence, the stocks of joint
venture banks are more volatile than the market index. The beta coefficient of all
joint venture banks is lower than beta coefficient of market (βM) resulting defensive
stock. The portion of unsystematic risk of the commercial banks are less than the
portion of systematic risk indicating less risk can be eliminated or in the control of
the banks. The return of joint venture banks has ranges of very low degree to high
degree with both positive and negative correlation with the market return and the
correlation is both significant and insignificant.
Keywords: Risk, return, systematic risk, unsystematic risk, joint venture banks.