The Dynamics of Risk and Return in the Stock Market of Finland During Pre and Post Financial Crisis Periods

Abstract

In a high-risk situation such as a financial crisis, investors need to properly allocate resources for insurance purposes and accurately predict possible market movements and reactions. The situation on the stock markets could be predicted according to the previous behaviour, especially in a time of crisis. Therefore, it is crucial to know the market behaviour according to various historical periods. The research aims to understand Finnish stock companies' risk and return dynamics during the pre and crisis, post-crisis, and recovery period. The timescale for investigation was 15 years, starting from 2005. The appropriate literature and the previous studies were reviewed. Secondary data of historic risk and return values were collected and analysed in several ways (graphical and descriptive analysis) to answer research questions. These values were analysed with the usage of the MS Excel analysis software. It can be concluded after the findings that Finnish companies stock returns had been performing at their peak during the post-crisis period. Compared to their interventions before and after the crisis, the systemic risk, unsystematic risk, and overall risk increased during the crisis. The relationship between risk and returns has been established in terms of their interdependence. Exploring the crisis provides investors with a practical foundation for making decisions about future investments and behaviour in the stock markets. The research technique can also be applied to other stock markets to determine risk and return dynamics.