08569portfolio mgt11

7/29/2019 08569portfolio mgt11

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Portfolio mgt


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phases

Specifications of investment objectivesand constraints

Choice of asset mix

Formulation of portfolio strategy

Selection of securities

Portfolio execution

Rebalancing

Performance evaluation


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Specifications of objectives

What risk level u can bear

What returns are expected

What are the preferences regardingliquidity,investment horizon,taxes etc.

Maximise return at risk level specified

Minimise risk at the specified income level. Income ,growth and stability goals.


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Risk tolerance

Aggressive

Conservative,

moderate


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Selection of asset mix

Choice of investments- risk/timehorizon

Long stock, short- bonds horizon

Highrisk stock , lowrisk - bonds


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Formulation of portfolio strategy

Active

Market timing

a. Sector rotation

b. Security selection

c. Use of specialised

concept.-

growth,assetrich,tech,value

passive

Predetermined level

of risk

Unchanged portfolio


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Value vs growth

Value management typically buy stocks

which have low p.e,bkvalue,avg earnings

growth and high dividend yields.

Contrarian mger- out of favour stocks

Growth stocks enjoy high rates of

earningsper share,high pe,pbr,low

dividend,.1beta and popular.


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SELECTION OF SECURITIES

BONDS ytm,DEFAULT RISK,TAX

SHIELD,LIQUIDITY

STOCK- PE,DIVIDENDS,BETA,

TECHNICAL ANALYSIS,FUNDAMENTAL,

RANDOM SELECTION OF STOCK


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PORTFOLIO EXECUTION

BUYING AND SELLING TRADING

PLAYERS IN INVESTMENT

VALUE BASED LIQUIDITY BASED

INFORMATION BASED

PSEDO INFOBASED DEALERS


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PORTFOLIO REVISION

MONITOR, REVISE PERIODICALLY

REVIEWING AND REVISING

COMPOSITION OF ASSETS

SHIFTING FROM STOCKS TO BONDS-

UPGRADING


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PERFORMANCE EVALUATION

RATE OF RETURN

RISK


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CALCUALTION OF RETURN/RISK

DIVIDEND + TERMINAL VALUE-INTIAL

VALUE

__________________________________

INTIALVALUE

Risk Variance and Beta


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Portfolio Risk And Return

Return of a portfolio is the sum of its

weighted returns

Risk of a portfolio is measured in its

standard deviations and variances

calculated with variances and

covaariances between assets and their

respective weights.


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Minimum risk Portfolio

Minimum risk portfolio can be found for a

given level of Risk & income how much

should one invest in an asset to minimize

risk can be found with the formula. 1-Wawill give the weight of the other asset.


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Performance measures

Treynor X - Rf /Std deviation

Sharpe measure X Rf / Beta

Jensen measure Expected return to be calculated as per

CAPM

Actual return- expected return = alfacoefficient

08569portfolio mgt11

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