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Risk Diversification and Market Index Model

In: Risk-Return Relationship and Portfolio Management

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  • Raj S. Dhankar

    (University of Delhi)

Abstract

The study attempts to measure the relationship between riskRisk and return, and the effect of diversificationDiversification on non-market riskNon-market risk in Indian stock marketIndian stock market by applying Market Index ModelMarket index model . For the analysis, monthly adjusted opening and closing prices of composite portfolioPortfolio of BSE 100BSE 100 companies for the period June 1996 through May 2005 have been taken. We find a high positive correlation between portfolioPortfolio return and riskRisk . It also signifies that portfolioPortfolio non-market riskNon-market risk declines with diversificationDiversification . The results, so obtained, are fully coinciding with the generalization of market index modelMarket index model , and thereby hold it applicable in Indian stock marketIndian stock market , in establishing the trade-off between riskRisk and return.

Suggested Citation

  • Raj S. Dhankar, 2019. "Risk Diversification and Market Index Model," India Studies in Business and Economics, in: Risk-Return Relationship and Portfolio Management, chapter 0, pages 233-247, Springer.
    • Handle: RePEc:spr:isbchp:978-81-322-3950-5_15
    DOI: 10.1007/978-81-322-3950-5_15
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