Page. Preface I-5 Acknowledgement I-9 Syllabus I-11 Chapter-heads I-15. Contents. Page

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1 Contents Preface I-5 Acknowledgement I-9 Syllabus I-11 Chapter-heads I-15 1 INVESTMENTS : AN OVERVIEW Learning Outcomes Investment Financial Investment vs. Real Investment Objectives of Investment Features (or Factors affecting Investment) Speculation Risk Return Trade off Investment Environment Investment Decision Process Direct Investing and Indirect Investing Approaches to Investing - Active Investing (Investment) and Passive Investing (Investment) 1.10 Diversification, Hedging and Arbitrage Impact of Taxes on Investment Impact of Inflation Investment 19 Summary 20 Test Yourself I-17

2 CONTENTS I-18 2 Indian Securities Market Learning Outcomes Structure of Indian Securities Market Market Participants Market Segments Trading Mechanism on Exchanges National Securities Clearing Corporation Limited (NSCCL) Stock Indices Regulation of Securities Market in India (SEBI) Reforms introduced by SEBI Latest Developments Other developments in Indian stock market since Screen based trading and Online (Internet based) 47 trading system Depository system, dematerialisation and scrip less 48 trading Book building Derivatives Rolling settlement Securities lending scheme Regulation regarding prohibition of Insider Trading Regulation of Unpublished Price Sensitive Information 60 Summary 63 Test Yourself 65 3 ANALYSIS OF RETURN AND RISK Learning Outcomes Return Types of Returns and their Calculation Average Return Expected Return (Based on probability distribution) 78

3 I-19 CONTENTS Return of a portfolio Holding Period Return Limitations of HPR A Effective Annualized Return Absolute Return Risk-adjusted Return Risk Causes (or Sources) and Types of Risk Systematic Risk Unsystematic Risk Types of Investors Risk Aversion, Utility Analysis and Indifference Curves Calculation of Total Risk Coefficient of Variation: A relative measure of Risk Calculation of Systematic Risk Unsystematic Risk Expected Return (based on Capital Asset Pricing Model) Abnormal Return Impact of Taxes on Investment Return Impact of Inflation on Return from Investment 104 Solved Problems 105 Summary 119 Test Yourself 120 Project work FIXED INCOME SECURITIES-VALUATION, YIELDS AND RISKS Learning Outcomes Bond Fundamentals Types of Bonds Bond Valuation (or Valuation of a fixed income security) Interactions between Bond Value, interest rate 143 (required rate of return) and time to maturity

4 CONTENTS I Valuation of Convertible debentures Valuation of Deep Discount Bonds (or zero coupon bonds) Bond Yields Risks in Bonds Malkiel s Properties regarding Bond Pricing (Bond Prices, interest rate (or yields) and Time to maturity) 4.10 Bond Duration (Frederick Macaulay Duration) Credit Rating Credit Rating Agencies in India Credit Rating Methodology Advantages of Credit Rating Agencies Limitations of Credit Rating Agencies 176 Solved Problems 177 Summary 191 Test Yourself 192 Project work EQUITY ANALYSIS - Fundamental Analysis Learning Outcomes Approaches to Security Analysis Fundamental Analysis EIC Framework Economic Analysis Industry Analysis Company Analysis 210 Summary 217 Test Yourself 218 Project work TECHNICAL ANALYSIS Learning Outcomes Technical Analysis Difference between Fundamental Analysis and Technical Analysis 221

5 I-21 CONTENTS 6.3 Basic Tenets (Propositions) of Technical Analysis Tools of Technical Analysis Charts Technical Indicators and Technical Chart Patterns Specific Stock Indicators Limitations of Technical analysis 242 Summary 243 Test Yourself 244 Project work EFFICIENT MARKET HYPOTHESIS Learning Outcomes Random Walk Theory (RWT) Efficient Market Hypothesis Forms of Market Efficiency Weak Form Hypothesis Semi Strong Form Strong Form of Market Efficiency Implications of EMH Tests of Market efficiency 252 Summary 256 Test Yourself 257 Project work VALUATION OF EQUITY SHARES Learning Outcomes Peculiar features of Equity shares Valuation of Equity share Discounted Cash Flow Models Dividend Discount 261 Models Earnings Multiplier Approach or Price-Earnings Model 273 (P/E based model) for share valuation Capital Asset Pricing Model (CAPM) 277

6 CONTENTS I-22 Solved Problems 278 Summary 291 Test Yourself 291 Project work PORTFOLIO ANALYSIS AND SELECTION Learning Outcomes Portfolio Management Process Portfolio Analysis - Markowitz Model Portfolio return Portfolio risk Limitation of Markowitz Model of Portfolio Analysis Portfolio Selection Portfolio Theory of Harry Markowitz (1952) or Mean 317 Variance Optimisation Model Capital Market Theory From Capital Market Theory to Capital Asset Pricing Model (CAPM) Capital Asset Pricing Model SML and CML Uses of CAPM Criticism/Limitations of CAPM 340 Solved Problems 341 Summary 368 Test Yourself 369 Project work Portfolio Performance Evaluation and Mutual Funds Learning Outcomes Portfolio Performance Evaluation Risk Adjusted Measures or techniques for Evaluating Performance of Portfolios 377

7 I-23 CONTENTS 10.3 Mutual Funds Evolution of Mutual Funds in India Mutual Fund Schemes Latest Developments Regarding Mutual Funds Evaluating Performance of Mutual Funds 397 Solved Problems 401 Summary 407 Test Yourself Financial Derivatives - Forwards, Futures and Options Learning Outcomes Introduction to Derivatives Classification of Derivatives Participants (or Traders) in Derivatives Market Forwards Futures Futures contract terminology Comparison between forwards and futures Types of financial futures contracts Pricing (or valuation) of futures contract (or a forward contract) Options Financial Derivatives Market in India 449 Solved Problems 452 Summary 463 Test Yourself Investor Protection Learning Outcomes Role of Sebi in investor Protection Investor s Grievances and Redressal System of sebi Scores (sebi Complaints Redress System) 473

8 CONTENTS I Securities Ombudsman Grounds of complaints Other Regulators/Authorities to approach for complaints other than those dealt by SEBI 12.6 Reforms brought up by SEBI Amendments in Listing Agreement Regulation regarding prohibition of Insider Trading Regulation of Unpublished Price Sensitive Information Investors Awareness SEBI Investor Protection and Education Fund Role of Stock Exchanges in Investor Protection BSE initiatives for Investor Protection NSE initiatives for Investors Protection Investors Activism Investors Activism in India 497 Summary 499 Test Yourself 499 B.Com. (Hons.) 2015 Paper : Fundamentals of Investment 501 B.Com. (TYUP) 2016 Paper : Security Analysis & Portfolio 511 Management Mathematical Tables 523

FINS2624: PORTFOLIO MANAGEMENT NOTES

FINS2624: PORTFOLIO MANAGEMENT NOTES UNIVERSITY OF NEW SOUTH WALES Chapter: Table of Contents TABLE OF CONTENTS Bond Pricing 3 Bonds 3 Arbitrage Pricing 3 YTM and Bond prices 4 Realized Compound Yield