Market Volatility & Proactive Risk Management Practices for Mutual Fund
Journal Title: Global Business and Management Research: An International Journal - Year 2010, Vol 2, Issue 2
Abstract
Purpose - Financial markets are luring more investors by offering them promising solutions, but sometimes the non-professional investors are trapped in this phenomenon without the pre hand knowledge about presence of acute risk. The main objective behind presenting this paper is to verify the random behavior of stock price movements and then portray systematic approaches of proactive risk management aspresence of risk in stock market trading is a normal feature. Design/methodology/approach - As this paper suggest systematic strategies which even a common investor from non-finance background can apply, thus, for easy understanding both qualitative and quantitative measures have been presented. Initial, part of this paper discusses empirical results that verify the random behavior of stock market and in the forthcoming section certain methodologies have been presented for risk management. Findings - Empirical research on stock prices behavior has supported Efficient Market Hypothesis (EMH) and given a clue that no pattern in the stock market movement are identifiable, so no accurate forecast of future market behavior can be anticipated. This conclusion has fostered a need to identify exceptional strategies that mutual fund Asset Management Companies (AMCs) may adopt to limit their decision in accepting calculated risk.This paper presents systematic approaches of proactive risk management strategies which mutual fund managers may adopt for defining their boundaries of assuming calculated risk. A proposal of Market volatility Risk Analysis (MvRA) will also enable AMCs to use their professional skills in quantifying the risk that will signal the need of portfolio diversification. Originality/value - Presence of rationality in human behavior always allows accepting minimum risk whereby Random Walk Hypothesis (RWH) suggests that markets have random movements. Thus, in an attempt to look systematic approaches that can guide investors to assume calculated risk this paper provides detailed methodical strategies which are generic in nature.
Authors and Affiliations
Nidhi Walia, Ravi Kiran
Keywords
Related Articles
- EP ID EP85595
- DOI -
- Views 162
- Downloads 0
Market Volatility & Proactive Risk Management Practices for Mutual Fund
Purpose - Financial markets are luring more investors by offering them promising solutions, but sometimes the non-professional investors are trapped in this phenomenon without the pre hand knowledge about presence of acu...