The Issue Of Measuring Risk And Return Of Financial Assets (1635 words)

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QuestionQuestion

Measurement of portfolio returns and risks
Guidelines:
The paper should have the following clearly identifiable sections:
1. Introduction: A clear, concise explanation of the question or issue that you examine in the paper and, if necessary, an explanation as to how this issue relates to the broad field of investments.
2. Motivation: Your main motivation (or justification or rationale) as to why you chose this particular question or issue for this paper.
3. Literature review: An overview of the topic followed by a detailed summary/review of three (or more papers or articles) relevant to this topic that you have studied in depth. Please start by summarizing the focus of each article or the issues examined in each article, the analytical methods employed by the authors, the authors findings and their conclusions. You can then add your own comments about the issues, the methods, the findings and the conclusions arrived at in each of the articles.
4. Conclusion: Summarize the main conclusions you have arrived at after having read and critically examined all the papers; link these conclusions to your introduction and motivation. Identify issues and questions that you found interesting and/or have still left unresolved after your exercise.
5. Bibliography: Bibliography in MLA, APA or Chicago format. Please check the online resources on the UWB library website to create citations and bibliographies (RefWorks, EndNote and CitationMachine are free online programs available through UWB library to create bibliographies; you may find these useful).

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Introduction
The main goal behind all investment activities is to maximize the returns that can be reaped through investing money in securities and financial instruments. However, every security also carries some amount of risk. While stocks provide higher return compared to Treasury Bonds, the associated risk is also high. This leads to the question of what type of returns should the investor focus on. It is important to incorporate the risk component also so as to ensure consistency in comparison and analysis. Different researchers have defined several measures of risk and return. This paper focuses on the issue of measuring risk and return of financial assets and also presents an analysis of the relation between these two concepts.
Motivation
Risk and return have been two of the most important concepts in investment finance. As an investor, it is important for me to construct my portfolio in a manner to minimize the risk and maximize the return. However, I can implement these strategies only after I know how to measure risk and return. There are several measures and it is important for me to understand the pros and cons of each measure so that I can use them accordingly and manage my portfolio. Risk and return are like two sides of the same coin which are always present together. As such, as a prudent investor, I need to know how to measure them so that I can optimize them.
Literature review
Return can be defined as the additional...
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