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Correlation, Uncertainty and Investment Decisions

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Book cover Risk-Return Relationship and Portfolio Management

Part of the book series: India Studies in Business and Economics ((ISBE))

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Abstract

Capital market efficiency is a matter of great interest for policymakers and investors in designing investment strategy. If efficient market hypothesis (EMH) holds true, it will prevent the investors to realize extra return by utilizing the inherent information of stocks. They will realize extra returns only by incorporating the extra risky stocks in their portfolios. While empirical tests of EMH and risk –return relationship are plentiful for developed stock markets, the focus on emerging stock markets like India, Pakistan, Sri Lanka, etc., began with the liberalization of financial systems in these markets. With globalization and deregulation, the enormous opportunities of investment in South Asian stock markets have attracted the domestic and foreign institutional investors in general, and to reduce their portfolio risk by diversifying their funds across the markets in particular.

The key to making money in stocks is not to get scared out of them.

Peter Lynch

This chapter draws from the author’s previous publication (Kumar & Dhankar, 2009), co-authored with Rakesh Kumar, Assistant Professor in the Department of Business Studies, Deen Dayal Upadhyaya College (University of Delhi), New Delhi; originally published in VIKALPA: The Journal for Decision Makers, Vol. 34 No. 4. Copyright © 2009 Indian Institute of Management, Ahmedabad. All rights reserved. Reproduced with the permission of the copyright holders and the publishers, SAGE Publications India Pvt. Ltd, New Delhi.

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Authors and Affiliations

  1. Faculty of Management Studies (FMS), University of Delhi, New Delhi, Delhi, India

    Raj S. Dhankar

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  1. Raj S. Dhankar
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Correspondence to Raj S. Dhankar .

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Dhankar, R.S. (2019). Correlation, Uncertainty and Investment Decisions. In: Risk-Return Relationship and Portfolio Management. India Studies in Business and Economics. Springer, New Delhi. https://doi.org/10.1007/978-81-322-3950-5_11

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  • DOI: https://doi.org/10.1007/978-81-322-3950-5_11

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