Abstract
This paper attempts to measure the risk and return relationship in Dhaka Stock Exchange (DSE) of Bangladesh. Applying Single Index Model, the study reports statistically significant positive relationship between risk and return both at the individual security level and at the portfolio level. While portfolio risk and returns are found to be significantly positively related in general, that is not always the case for high risk portfolios, suggesting the existence of some anomalies or mispricing. These findings have important implications for investment decisions in DSE in that the investors may be able to form profitable investment strategies using the mispricing information.
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