NON-MACROECONOMIC RISK AND RETURN ANALYSIS OF STOCK MARKET VS. REAL ESTATE IN MUMBAI

Abstract

This study examines risk and return in Mumbai's Indian stock market and the city's real estate sector using non-macroeconomic factors. It uses a mixed-methods approach, analysing historical performance data and surveying 152 investors and professionals. Risk-adjusted returns are measured using metrics like Compound Annual Growth Rate (CAGR), volatility, Sharpe ratio, rental yield, and Maximum Drawdown (MDD). The study excludes macroeconomic variables like inflation and interest rates, focusing on micro-level determinants of investment performance. The stock market showed superior capital appreciation, but with higher volatility and liquidity risks. Mumbai's real estate, particularly in prime commercial zones, provided more stable income through rental yields and lower volatility but suffered from low liquidity, high entry/exit costs, and regulatory risk. The study found that 62% preferred stocks for higher risk-adjusted returns, while 70% saw real estate as more stable but illiquid. The findings help investors identify optimal asset allocation strategies, with a 60-40 portfolio split favouring equities as an ideal balance between growth and income. Policymakers and regulators are urged to focus on strengthening RERA compliance, improving transparency in real estate, and fostering REITs and systematic investment plans to make both asset classes more accessible and efficient.