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Designing a Portfolio Based On Risk and Return of Various Asset Classes

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  • Rashmi Soni

Abstract

Every investor¡¯s dream is to maximize return with minimum risk. Since this is practically impossible, the target is to optimize the risk and return. Different asset classes perform differently at different points of time. The performance is affected by the business as well as other local and global macroeconomic parameters. Crude oil, real estate, gold etc. have given very high returns previously but have turned unattractive in recent times. Equity market has over a long term returned handsome benefits but is highly volatile and hence fraught with risks. The risk free investments like fixed, on the other hand, fall in the low-risk low-return category. The purpose of this study is to analyze the returns of various asset classes and correlate these with their risk characteristics in order to verify whether there is always a positive relation between risk and return across all asset classes and to find out the portfolio mix of the various asset classes corresponding to the desired return and risk.

Suggested Citation

  • Rashmi Soni, 2017. "Designing a Portfolio Based On Risk and Return of Various Asset Classes," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(2), pages 142-149, February.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:2:p:142-149
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    References listed on IDEAS

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    1. Lu Han, 2013. "Understanding the Puzzling Risk-Return Relationship for Housing," The Review of Financial Studies, Society for Financial Studies, vol. 26(4), pages 877-928.
    2. Barua, Samir K. & Varma, Jayanth R., 2006. "A First Cut Estimate of the Equity Risk Premium in India," IIMA Working Papers WP2006-06-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
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    Cited by:

    1. Windari Christy Nainggolan & Vincentia Wahju Widajatun, 2020. "The influence of monetary performance on stock return in consumer goods industry: A case of Indonesian Stock Exchange," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 9(3), pages 39-50, July.

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    More about this item

    Keywords

    portfolio; equity; gold; debt; assets class; risk; return;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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