Dynamic market risk and portfolio choice: Evidence from Indian stock market

Agarwal, Subham; Chakravarti, Sourish; Ghosh, Owendrilla; Chakrabarti, Gagari

doi:10.1016/j.iimb.2023.08.001

IIMB Management Review

2023

DOI: 10.1016/j.iimb.2023.08.001

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Dynamic market risk and portfolio choice: Evidence from Indian stock market

Subham Agarwal,

Sourish Chakravarti,

Owendrilla Ghosh

et al.

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2024

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Does an increase in portfolio volatility create more returns? Evidence from India

Bhama

2024

Investment Management and Financial Innovations

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The classical view of experts associates greater risks with greater rewards. The present study explores whether increased volatility in portfolios can create more returns for investors by using technical indicators or the buy-and-hold (BH) strategy. The study used closing prices of National Stock Exchange (NSE) 500 index firms for a period of 16 years (2007–2022). Five portfolios ranging from low to high volatility were created using standard deviation as a key measure. Findings indicate that as the volatility of the portfolios increases, the moving average (MA) returns seem to be higher. Across the various MA time frames, the 20-day MA seems to have generated the highest return annually (36.53% before transaction costs and 31.05% after transaction costs) due to reasonable trading opportunities with adjustable transaction costs. The CAPM also generated positive alpha (after bearing transaction costs) in the case of 20, 50, and 100 days MA, with the values being 16.66%, 13.29%, and 12.09%, respectively, in the case of highly volatile portfolios. On the other hand, while the BH strategy created substantial returns in all scenarios, the risk factor was extremely high due to the high standard deviation. Hence, it is suggested that investors/traders consider the BH strategy more cautiously while choosing between technical analysis returns and BH returns. Investors with high-risk preferences may have BH as their choice, while day traders with managed risk appetites may prefer technical tools over BH returns. AcknowledgmentThe infrastructural support provided by the FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.

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Does an increase in portfolio volatility create more returns? Evidence from India

Bhama

2024

Investment Management and Financial Innovations

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Dynamic market risk and portfolio choice: Evidence from Indian stock market

Cited by 1 publication

References 44 publications

Does an increase in portfolio volatility create more returns? Evidence from India

Does an increase in portfolio volatility create more returns? Evidence from India

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