A STUDY ON RISK, RETURN IN PORTFOLIO SELECTION AND INVESTMENT DECISION

The goal of portfolio selection is to generate a portfolio that provides the highest returns at a given level of risk. Harry Markowitz portfolio theory provides both the conceptual framework and the analytical tools for determining the optimal portfolio in a disciplined and objective way. The inputs from portfolio analysis can be used to identify the set of efficient portfolios. From this set of portfolios, the optimal has to be selected for investment. It is highly sensitive and quickly response to incidents that happen in any corner of the world. Because of these reactions, stock market is highly volatile. The volatile nature of a stock market makes it difficult to predict the stock returns; the uncertainty in stock returns can be diversified. Next is systematic risk, which is influenced by market factors and cannot be diversified. Furthermore, the uncertainty of when to buy when to sells the stocks prevails all the time. Even all these uncertainties, a large number of infesters tend to invest their money in common stocks. Such investment common stocks can provide more substantial returns than the provided by corporate and government bonds. Since return from investment on common stock is uncertain, knowing the nexus between return and risk will be crucial for investors. This helps them to maximize their returns and minimize their risk. The possible increase and decrease in the price of a stock can be predicted in relation to possible increase and decrease in market. This study evaluates the investment strategies like buy and hold, and market timing.