Analyzed relationship between risks and expected returns

Doan Van Dinh

Journal of Economic and Administrative Sciences, 2021, vol. 39, issue 4, 749-759

Abstract: Purpose - This study aims to investigate the relationship between risks and the expected return of financial investment because the relationship between them is negative; if the investors agree to the higher level of risk, they have the greater the expected return; therefore, investors always require a degree of proportionality between the risks and returns. Design/methodology/approach - This study applied the standard deviation, variance, coefficient of variation methods and matrix function to measure risks. Besides, the dataset is a return on equity ROE, which is collected in three companies at time series from 2005 to 2020. Findings - When the variance or the standard deviation is higher, the return on the securities is higher, but the securities are a higher risk and vice versa. The results showed risk levels of stocks that are 2.509%, 0.367%, 3.666% and the corresponding return mean of 38.68%, 23.99% and 14.02%. Originality/value - The results support the portfolio management policy appropriately. This study identifies issues for managers, investors and readers to consider: have a comprehensive solution among microcosmic policies, finance policy, investment policy and other policies to control and balance the relationship between risks and returns; have appropriate policies to regulate funds to stimulate investment in the long term.

Keywords: Return on equity; Matrix function; Investment risk; Portfolio management; G1; G10; G11 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jeaspp:jeas-05-2021-0088

DOI: 10.1108/JEAS-05-2021-0088

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