Abstract

This paper attempts to measure the risk and return relationship in Dhaka Stock Exchange (DSE). The study reports a statistically significant positive relationship between risk and return both at the individual security level and at the portfolio level, confirming the theoretical predictions and empirical findings on this issue in developed markets. Although portfolio risk and returns are found to be significantly positively related in general, some inconsistencies were revealed in the context of relative risk for high risk portfolios, suggesting the existence of some anomalies or mispricing in high risk assets. These findings have important implications for investment decisions at the DSE in that the investors may be able to create profitable investment strategies using the mispricing information.

Keywords: Risk-Return trade-off, Mean-variance CAPM Model, Systematic risk, Portfolio beta, Emerging market, Dhaka Stock Exchange

How to Cite:

Mollik, A. T. & Bepari, M. K., (2015) “Risk-Return Trade-off in Emerging Markets: Evidence from Dhaka Stock Exchange Bangladesh”, Australasian Accounting, Business and Finance Journal 9(1), 71-88. doi: https://doi.org/10.14453/aabfj.v9i1.6