Risk-Return Analysis of the Indian Power Sector Companies: A Simulation & DCC-GARCH based Comparative Study

Abstract

As global financial markets become increasingly complex and volatile, the need for advanced analytical tools to conduct risk-return assessments, optimize portfolios, and support strategic investment decisions has grown substantially. This review synthesizes recent academic research in financial analytics, focusing on modern approaches such as stochastic optimization, simulation-based modeling, advanced data visualization, and statistical frameworks like the DCC-GARCH model. Covering studies published between 2018 and 2025, the paper examines how evolving techniques contribute to more efficient portfolio management and risk assessment.
Traditional models like the Markowitz Efficient Frontier continue to provide foundational insights, while contemporary methods such as Monte Carlo simulations and machine learning algorithms offer improved forecasting accuracy and dynamic performance evaluation for diversified portfolios. Visualization techniques play a critical role in simplifying complex financial data; methods like star-coordinate plots, the Pareto Race approach, and multi-factor visualization systems such as Portfolio enhance investor comprehension and decision-making.The review also delves into sector-specific applications, particularly in the energy and power sectors, where tools like the DCC-GARCH model are applied to track price volatility and market interdependencies. Metrics including the Sharpe Ratio, Value at Risk (VaR), Beta coefficients, and Jensen’s Alpha are used extensively to refine investment strategies and manage financial risk.
Moreover, the adaptability of these tools is highlighted in newer domains such as cryptocurrency portfolio optimization, showcasing their broad relevance. Overall, the literature underscores the value of computational finance in refining risk-return evaluations, guiding portfolio construction, and offering visual frameworks to navigate market uncertainty. This comprehensive overview serves as a resource for investors, financial practitioners, and policymakers seeking to make informed, data-driven decisions in today’s dynamic economic landscape.