An Empirical Risk and Return Analysis of BSE Broad Market Indices: Evidence From 2015–2024

This study examines the risk-return characteristics of the BSE Broad Market Indices—BSE 100, BSE MidCap, and BSE SmallCap—using monthly data from January 2015 to December 2024 within the Indian equity market context. Employing log return analysis, CAPM regression, principal component analysis, and efficient frontier simulation, the paper evaluates performance, volatility, and diversification potential across these indices. The findings reveal that the MidCap and SmallCap indices deliver higher average returns alongside higher volatility, while the BSE 100 offers greater stability, appealing to risk-averse investors. CAPM analysis confirms significant betas, indicating strong co-movement with market movements, while PCA highlights the dominance of a market-wide factor influencing returns. Efficient frontier analysis demonstrates opportunities for investors to achieve enhanced risk-adjusted returns through diversified allocation across size segments. The results contribute to the literature on emerging market indices and provide practical guidance for investors seeking to align return objectives with risk tolerance in portfolio construction within the Indian equity market.