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Table Of Contents

Investment Classification
Investment Motives or Goals
RISKS IN INVESTMENT
Types of Risk
NEED FOR PORTFOLIO MANAGEMENT
ACC HDFC Tata
THE PROCESS OF PORTFOLIO MANAGEMENT
Portfolio Management: An Evaluation
Efficient Portfolios and Efficient Frontier
Chapter 2 Capital Market Theory
INTRODUCTION
MARKOWITZ MODEL AND EFFICIENCY FRONTIER
Assumptions of Markowitz Model
CAPITAL ASSET PRICING MODEL (CAPM)
Assumptions of CAPM
Common to both the Markowitz model and CAPM
Additional assumptions
Lending and Borrowing at the Riskless Rate
THE DOMINANT PORTFOLIO M
Market Portfolio
THE SEPARATION THEOREM
Investor A
Investor B
THE CAPITAL MARKET LINE (CML)
CML: E(ri) = rf +{[E(rM) - rf]/ σM}σi
The Capital Asset Pricing Model (CAPM)
The CML vs. The CAPM
NON-STANDARD FORMS OF CAPM
Differential Borrowing and Lending Rates
Zero Beta CAPM
- E(rz)] βi
Tax-adjusted CAPM
Solution
APPLICATION OF CIVIL AND CAPM
Performance Evaluation of Portfolios
Data on Monthly Returns (%)
Tests of Asset Pricing Theories
Tests of Market Efficiency
Identifying Mispriced Securities
Chapter 3 Portfolio Analysis
Risk and Investor Preferences
The Efficient Set Theorem
The Feasible Set
Portfolio Effect in the Two-Security Case
STOCK X
(%) STOCK Y (%)PORTFOLIO STANDARD DEVIATION
Changing the Coefficient of Correlation
Graphic Illustration of Portfolio Effects
The Three-Security Case
The Sharpe Index Model
Generating the Efficient Frontier
Chapter 4 Selection of the Optimal Portfolio
Selection of the Optimal Portfolio
Optimal Portfolio Selection Using Lagrangian Multiplier
Example 4.1
Example 4.2
Optimal Portfolio Selection Using Sharpe’s Optimization
The Formation of Optimal Portfolios
Ranking Securities
Example 4.3
Establishing a Cut-off Rate C*
Constructing the Optimal Portfolio
Components of Risk and Returns
Ex ante Return of a Portfolio
Example 4.4
Ex Post Return of a Portfolio
Example 3.5
Example 4.6
Risk of a Portfolio
Example 4.7
Covariance
Example 4.8
Systematic and Unsystematic Risk
Beta of a Portfolio
Maturity (Year)
Indexing Strategy
ADVANTAGES AND DISADVANTAGES OF INDEXING STRATEGY
SELECTING AN INDEX
INDEXING METHODOLOGIES
Stratified Sampling or Cellular Approach
Optimization Approach
SEMI-ACTIVE MANAGEMENT
Portfolio Dedication
PURE CASH MATCHING
Example 5.1
CASH MATCHING WITH REINVESTMENT
Example 5.2
Advantages and Limitations of Portfolio Dedication:
IMMUNIZATION
Maturity Matching
Bond, Current Price = Rs.1000
Immunization
LOCKING IN THE PROMISED YIELD OR ACCUMULATING A TARGETED LEVEL OF WEALTH
Example 5.4
Reinvestmen
Semi-
FUNDING OF LIABILITIES
Example 5.5
Required
ACTIVE MANAGEMENT STRATEGIES
Interest Rate Anticipation
DECISION WITH RESPECT TO MATURITY
Mapping Returns
Mapping Expected Returns and Interest Rate Anticipation
3-Year30-Year
DECISION WITH RESPECT TO SECTOR
DECISION WITH RESPECT TO QUALITY
DECISION WITH RESPECT TO COUPON
Bond Swaps
SUBSTITUTION SWAP
Example 5.6
PURE YIELD PICK-UP SWAP
Example 5.7
Substitution Swap
USE OF DERIVATIVES IN BOND PORTFOLIO MANAGEMENT
Interest Rate Futures
SPECULATING ON THE MOVEMENT OF INTEREST RATES
CONTROLLING THE INTEREST-RATE SENSITIVITY OF A PORTFOLIO
HEDGING
Options
Interest Rate Swaps
Market Timing
Performance Attribution Analysis
Allocation Effect
Selection Effect
Risk-Adjusted Performance Measures: Some Issues
Use of Market Surrogate
Skill or Luck
Validity of CAPM
DIVERSIFICATION
Diversification across Industries
International Diversification
Diversification across Asset Classes
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Portfolio Management

Portfolio Management

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Published by Abhijit Erande

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Published by: Abhijit Erande on Nov 11, 2011
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