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Research Article Open access CC BY 3.0

Portfolio Management to Reduce the Risk of Stockholders in the Bangladesh Stock Market

Harun-Or-Rashid Howlader

Journal of Economics, Management and Trade · pp. 72–84 · Published 4 Oct 2013

10.9734/BJEMT/2014/5958

Abstract

This paper deals with reducing the risk of stockholders investment by implementing portfolio management in Bangladesh’s stock market. The Markowitz portfolio model derives the expected rate of return for a portfolio of stocks and a measurement of the expected risk, which is the standard deviation of the expected rate of return. The model showed that the expected rate of return of a portfolio is the weighted average of the expected return for the individual investments in the portfolio. The standard deviation of a portfolio is a function not only for a standard deviation for the individual investment but also the covariance between the rates of the return for all the pair of stocks in the portfolio. In a large portfolio, this covariance is an important factor. In this paper, seven years data of eight companies are used as a sample which are randomly collected the daily closing prices of their stocks from January 1, 2006 to June 25, 2012. These data are gathered from the Chittagong Stock Exchange (CSE), Bangladesh. Then these data are analyzed through the calculating expected return of the standard deviation or risk, covariance, correlation, and standard deviation of individual stocks, two stocks portfolio and also four stocks portfolio. Different analyses have shown that the combination of investment can reduce the risk of the investment.

Portfolio management standard deviation covariance correlation

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