Master in Business Administration – Semester 3 MF0010– Security Analysis and Portfolio Management - 4 Credits

(Book ID: B1208) Assignment Set- 1 (60 Marks) Note: Each question carries 10 Marks. Answer all the questions. Q.1 Frame the investment process for a person of your age group.

Answer: It is rare to find investors investing their entire savings in a single security. Instead, they tend to invest in a group of securities. Such a group of securities is called a portfolio. Most financial experts stress that in order to minimize risk; an investor should hold a well-balanced investment portfolio. The investment process describes how an investor must go about making. Decisions with regard to what securities to invest in while constructing a portfolio, how extensive the investment should be, and when the investment should be made. This is a procedure involving the following five steps: • Set investment policy • Perform security analysis • Construct a portfolio • Revise the portfolio • Evaluate the performance of portfolio 1. Setting Investment Policy This initial step determines the investor’s objectives and the amount of his investable wealth. Since there is a positive relationship between risk and return, the investment objectives should be stated in terms of both risk and return. This step concludes with the asset allocation decision: identification of the potential categories of financial assets for consideration in the portfolio that the investor is going to construct. Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds and cash. The asset allocation that works best for an investor at any given point in his life depends largely on his time horizon and his ability to tolerate risk. Time Horizon – The time horizon is the expected number of months, years, or decades that an investor will be investing his money to achieve a particular financial goal. An investor with a longer time horizon may feel more comfortable with a riskier or more volatile investment because he can ride out the slow economic cycles and the inevitable ups and downs of the markets. By contrast, an investor who is saving for his teen-aged daughter’s college education would be less likely to take a large risk because he has a shorter time horizon. Risk Tolerance - Risk tolerance is an investor’s ability and willingness to lose some or all of his original investment in exchange for greater potential returns. An aggressive investor, or one with a high-risk tolerance, is more likely to risk losing

money in order to get better results." While setting the investment policy. One purpose of this exercise is to identify those securities that currently appear to be mispriced. In other words. 2. Fundamental analysis is a method used to evaluate the worth of a security by studying the financial data of the issuer. This portfolio management style does not use market timing or stock selection strategies. or one with a lowrisk tolerance. A conservative investor. as well as determining the proportion of the investor’s wealth to put into each one. The conservative investors keep a "bird in the hand. Performing Security Analysis This step is the security selection decision: Within each asset type. assets and liabilities. . Unlike fundamental analysis. identified in the asset allocation decision. Here selectivity. Passive Management is the process of managing investment portfolios by trying to match the performance of an index (such as a stock market index) or asset class of securities as closely as possible. timing and diversification issues are addressed. the investor also selects the portfolio management style (active vs. Active Management is the process of managing investment portfolios by attempting to time the market and/or select „undervalued‟ stocks to buy and „overvalued‟ stocks to sell. Technical analysis is a method used to evaluate the worth of a security by studying market statistics. management. Security analysis is done either using Fundamental or Technical analysis (both have been discussed in subsequent units). technical analysis disregards an issuer's financial statements. investigation and analysis. 3. Instead. it relies upon market trends to ascertain investor sentiment to predict how a security will perform. by holding all or a representative sample of the securities in the index or asset class. tends to favour investments that will preserve his or her original investment. how does an investor select which securities to purchase. Portfolio Construction This step identifies those specific assets in which to invest. based upon research." while aggressive investors seek "two in the bush. passive management). It scrutinizes the issuer's income and expenses. Timing involves forecasting of price movement of stocks relative to price movements of fixed income securities (such as bonds). Diversification aims at constructing a portfolio in such a way that the investor’s risk is minimized. it focuses on the „basics‟ of the business. Selectivity refers to security analysis and focuses on price movements of individual securities. Security analysis involves examining a number of individual securities within the broad categories of financial assets identified in the previous step. and position in its industry.

Published since January 1. Q. On 25 July. risks incurred). Answer: SENSEX: Sensex is the stock market index for BSE. does not include restricted stocks. . the SENSEX is regarded as the pulse of the domestic stock markets in India. It is made of 30 stocks representing a sample of large.690 billion (US$348 billion). a dollar-linked version of SENSEX. therefore. The free-float method.733 billion (US$660 billion) (42. and its base year as 1978-79.2 From the website of BSE India. 1986. 4. the market capitalisation of SENSEX was about 29. 1979. are representative of various industrial sectors of the Indian economy.The following table summarizes how the portfolio is constructed for an active and a passive investor. As of 21 April 2011. 2001 BSE launched DOLLEX-30. as objectives might change and previously held portfolio might not be the optimal one. while its free-float market capitalization was 15. It was first compiled in 1986. government and strategic investors. explain how the BSE Sensex is calculated.34% of market capitalization of BSE). Instead of using a company's outstanding shares it uses its float. or shares that are readily available for trading. Portfolio performance evaluation This step involves determining periodically how the portfolio has performed over some time period (returns earned vs. 5. liquid and representative companies. The 30 component companies which are some of the largest and most actively traded stocks. The Bombay Stock Exchange SENSEX (acronym of Sensitive Index) more commonly referred to as SENSEX or BSE 30 is a free-float market capitalizationweighted index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. such as those held by promoters. Portfolio Revision This step is the repetition of the three previous steps. The base year of SENSEX is 1978-79 and the base value is 100. The base value of the SENSEX is taken as 100 on April 1. The Bombay Stock Exchange (BSE) regularly reviews and modifies its composition to be sure it reflects current market conditions. The index is calculated based on a free float capitalization method—a variation of the market capitalisation method.

replacement of scrips. Following is the list of the component companies of SENSEX 2010. which translates to roughly 9% per annum after compensating for inflation.90 0 50018 HDFC Bank Finance 0. Free float factor represent the percentage of shares that are readily available for trading.75 0 50001 HDFC Finance 0.6% per annum.35 3 53245 Bharti Airtel Telecom 0. Using information from April 1979 onwards.21 5.43 1. As per free float capitalization methodology. the index was calculated based on the ‘full market capitalization’ method. 2003. Code Name Sector Factor 50041 ACC Housing Related 0. Weight Index(%) 0. Transport Equipments 0.7 as on Feb 26.03 1.25 8 50030 Grasim Industries Diversified 0. the free float market capitalization is regarded as the industry best practice.5 5. The index has increased by over ten times from June 1990 to the present. Metal. etc.35 4 53286 DLF Universal Limited Housing related 0. the long-run rate of return on the BSE SENSEX works out to be 18.77 3. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company.The divisor is the only link to original base period value of the SENSEX.50 2 50044 Hindalco Industries Ltd. Adj.Initially.Metal Products & 0. the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period.02 1.75 in . Globally. Free float factor is also referred as adjustment factor. However this was shifted to the free float method with effect from September 1.55 0 50010 BHEL Capital Goods 0. This market capitalization is multiplied by a free float factor to determine the free float market capitalization.85 0 50018 Hero Honda Motors Ltd. The calculation of SENSEX involves dividing the free float market capitalization of 30 companies in the index by a number called index divisor.26 3 1. It keeps the index comparable over time and is the adjustment point for all index adjustments arising out of corporate actions.

15 Information Technology 0.26 4. Metal Products. Metal Products 0.88 Information Technology 0.66 1.70 .50 Information Technology 0.90 Jaiprakash Associates Housing Related Larsen & Toubro Capital Goods Mahindra & Mahindra Transport Equipments 0.71 2.19 4.63 2.0 50069 6 53217 4 50020 9 50087 5 53253 2 50051 0 50052 0 53250 0 53254 1 53255 5 50030 4 50031 2 53271 2 50032 5 50039 0 50011 2 50090 0 52471 5 53254 0 50057 0 50040 0 50047 Mining Hindustan Limited ICICI Bank Infosys ITC Limited Lever FMCG Finance 0.55 Power 0.86 10.15 Power 0.20 0.39 1.99 1.03 2.40 Industries Tata Consultancy Information Technology 0.03 3.25 Services Tata Motors Tata Power Tata Steel Transport Equipments 0.92 12.61 1.08 7.70 Metal.03 3.25 6.45 and Mining Sun Pharmaceutical Healthcare 0.85 1.03 2.57 2.65 0.50 0. 0.35 0.85 FMCG 0.55 0.75 Limited Maruti Suzuki NIIT Technologies NTPC NIIT ONGC Reliance Communications Reliance Industries Transport Equipments 0.15 Oil & Gas Telecom Oil & Gas 0.45 Reliance Infrastructure Power State Bank of India Sterlite Industries Finance Metal.70 0.50 1.94 1.00 2.87 0.71 1.

dependent on the economy in which it operates. unemployment (the percent of the population that wants to work and is currently not working). The capital account is an account of the cross-border transactions in financial assets. A capital account deficit occurs when the investments made in the country by foreigners is less than the investment in foreign countries made by local players. ultimately. productivity (output per worker). as excessive inflation undermines consumer spending power (prices increase) and so can cause economic Security Analysis and Portfolio Management stagnation. Answer: Economic analysis is done for two reasons: first. a company’s growth prospects are. changes in the exchange rate affect the exports and imports. If exchange rate strengthens. domestic legislation (laws and regulations). It consists of the current account and the capital account. all other things being equal.61 Q. BOP reflects a country’s international monetary transactions for a specific time period. second. exchange rates. 1 Factors to be considered in economy analysis The economic variables that are considered in economic analysis are gross domestic product (GDP) growth rate. public attitude (consumer confidence) inflation (a general increase in the price of goods and services).3 Perform an economy analysis on Indian economy in the current situation. GDP growth rate shows how fast the economy is growing. The BOP affects the exchange rate through supply and demand for the foreign currency. Inflation is important for investors. government policy (fiscal and monetary policy). A current account deficit occurs when a country imports more goods and services than it exports. the balance of payments (BOP). However. imports are affected. the current account deficit. as most companies generally perform well when the economy is doing the same. interest rates. if the exchange rate weakens. capacity utilization (output by the firm) etc . GDP is the total income earned by a country.0 50768 Wipro 5 & Mining Information Technology 0. exports are hit. . share price performance is generally tied to economic fundamentals. Investors know that strong economic growth is good for companies and recessions or full-blown depressions cause share prices to decline. The current account is an account of the trade in goods and services. deflation (negative inflation) can also hurt the economy. The exchange rate affects the broad economy and companies in a number of ways. First. as it encourages consumers to postpone spending (as they wait for cheaper prices).20 1.

businesses are able to charge more for their items causing prices to rise. During inflationary times. The business cycle consists of expansionary and recessionary periods. In the expansion phase. and employment is expanding.The currency of a country appreciates when there is more foreign currency coming into the country than leaving it. Eventually. Usually. This recurring pattern of recession and recovery is called the business cycle. employers lay off workers (unemployment increases) and demand further slackens. share prices improve when interest rates fall and decline when interest rates increase. the cost of borrowing by businesses is not expensive. demand slackens which causes economic activity to decrease. Peaks represent the end of an expansion and the beginning of a recession. borrowing may become too costly and plans for expansion are postponed. a low point on the cycle is a trough. production and demand are increasing. Businesses and consumers normally borrow more money for investment and consumption purposes. As business activity contracts. The levels of interest rates (the cost of borrowing money) in the economy and the money supply (amount of money circulating in the economy) also have a bearing on the performance of businesses. demand for goods overtakes supply and prices rise. Therefore. there is too much money chasing a limited amount of goods. when the cost of borrowing becomes too high (when the interest rates go up). The direction in which an economy is heading has a significant impact on companies‟ performance and ability to deliver earnings. and companies can easily borrow to expand and develop their activities. Troughs represent the end of a recession and the beginning of an expansion. All other things being equal. In very broad terms. The cycle then enters the recessionary phase. lower prices stimulate demand and the economy moves into the expansion phase. a surplus in the current or capital account causes the currency to strengthen. this causes prices to fall. a deficit causes the currency to weaken. reduces the purchasing power of the consumer. This is because the demand for most products decreases during economic declines. As prices rise. it is likely that many business sectors will fail to generate profits. 2 Business cycle and leading coincidental and lagging indicators All economies experience recurrent periods of expansion and contraction. When business activity reaches a high point. an increase in money supply causes the interest rates to fall. since people . This creates inflation. The cycle enters the trough. On the other hand. If interest rates are low. Interest rates also have a significant effect on the share markets. As the cycle moves into the peak. The performance of an investment is influenced by the business cycle. it peaks. This. Therefore. business activity is growing. There are two reasons for that: the “intrinsic value” estimate will increase as interest rates (and the linked discount rate) fall and underlying company profitability will improve. in turn. if interest payments reduce. a decrease causes the interest rates to rise. If the economy is in a recession.

They tend to change directly with the economy. say the closing prices of a stock for 3 days are Rs. manufacturing and trade sales etc. Some indicators may use only the closing prices. On the other hand. reflecting the financial. companies tend to expand their operations and in turn generate higher levels of earnings. and lagging indicators. one data point does not offer much information. Q.33). Economic indicators are quantitative announcements (released as data). high. Example includes industrial production. Examples: ratio of trade inventories to sales. Lagging Indicators tend to follow (lag) economic performance. economical and social atmosphere of an economy. while others incorporate volume and open interest into their formulae. However. during times of economic prosperity. Price data can be any combination of the open. then the average of the 3 closing prices is one data point ((41+43+43)/3=42. Coincident indicators usually mirror the movements of the business cycle. Security Analysis and Portfolio To some extent the business cycle can be predicted as it is cyclical in nature. as the demand for goods tends to grow. where we drop the earliest closing price . money supply etc. If a technical indicator is constructed using the average of the closing prices. Leading indicators tend to precede the upward and downward movements of the business cycle and can be used to predict the near term activity of the economy. Rs. The three types are leading. 43 and Rs. ratio of consumer installment credit outstanding to personal income etc. They are used to monitor the health and strength of an economy and they help to evaluate the direction of the business cycle. 41.4 Identify some technical indicators and explain how they can be used to decide purchase of a company’s stock. Thus we can have a 3 period moving average as a technical indicator. Examples of leading indicators are: Average weekly hours of production workers.have less money with which to purchase goods and services (since high levels of unemployment are common during economic crises). The price data is entered into the formula and a data point is produced. 43. For example. coincident. A series of data points over a period of time is required to enable analysis. Economists use three types of indicators that provide data on the movement of the economy as the business cycle enters different phases. They are published by various agencies of the government or by the private sector. Thus they can help anticipate rising corporate profits and possible stock market price increases. low or closing price over a period of time. Lagging Indicators are economic indicators that change after the economy has already begun to follow a particular pattern or trend. The prediction can be done using economic indicators. Answer: A technical indicator is a series of data points that are derived by applying a formula to the price and/or volume data of a security. released at predetermined times according to a schedule.

By creating a time series of data points. trends. the leading indicator helps identify oversold conditions for buying opportunities. Early signals can forewarn against a potential strength or weakness. Technical indicators measure money flow. Others. to the extent that the number of market participants „long‟ of the market significantly outweighs those on the sidelines or holding „short‟ positions. are derived from simple formulae and they are relatively easy to understand. Technical indicators are constructed in two ways: those that fall in a bounded range and those that do not. There are two main types of indicators: leading and lagging. Some. a comparison can then be made between present and past levels. like stochastic have complex formulae and require more effort to fully understand and appreciate. Lagging indicators follow the price action and are commonly referred to as trendfollowing indicators. They are used for two main purposes: to confirm price movement and the quality of chart patterns. The technical indicators that are bound within a range are called oscillators. Indicators filter price action with formulae. Once shown in graphical form. In a market that is trending down. They are designed to get traders in and keep them in as long as the trend is intact. The main benefit of leading indicators is that they provide early signaling for entry and exit. A lagging indicator follows price movement and therefore is a confirmation. A technical indicator offers a different perspective from which to analyze the price action. an indicator can then be compared with the corresponding price chart of the security. and to form buy and sell signals. Lagging indicators work best when the markets or securities develop strong trends.and use the next closing price for calculations. A leading indicator precedes price movements. Technical indicators are usually shown in a graphical form above or below a security’s price chart for facilitating analysis. Leading indicators can be used in trending markets. In a market that is trending up. A market is said to be „overbought‟ when prices have been trending higher in a relatively steep fashion for some time. Therefore they are derivative measures and not direct reflections of the price action. This means that there are fewer . Some of the more popular leading indicators include Relative Strength Index (RSI) and Stochastic Oscillator. Any analysis of an indicator should be taken with the price action in mind. Some popular trend-following indicators include moving averages and Moving Average Convergence Divergence (MACD). This should be taken into account when analyzing the indicators. such as moving averages. volatility and momentum etc. these indicators are not effective in trading or sideways markets. therefore they are used for prediction. Sometimes indicators are plotted on top of the price plot for a more direct comparison. Oscillators are used as an overbought / oversold indicator. leading indicators can help identify overbought situations for selling opportunities. Technical indicators can provide unique perspective on the strength and direction of the underlying price action. As such.

the most recent close (day 11) is added to the total and the oldest close (day 1) is subtracted. trends. The most common way to calculate the moving average is to work from the last 10 days of closing prices. These indicators help identify momentum. but they can vary in the way they do this. Crossovers occur when either the price moves through the moving average. This indicates that the direction of the price trend is weakening. The technical indicators that are not bound within a range also form buy and sell signals and display strength or weakness in the market. The market has been trending lower for some time and is running out of „fuel‟ for further price declines. The two main ways that technical indicators are used to form buy and sell signals is through crossovers and divergence. The MACD plots the difference between a 26-day exponential moving average and a 12-day exponential moving average. Oscillators are the most common type of technical indicators. The „oversold’ condition is just the opposite. The purpose of the moving average is to track the progress of a price trend. it's a bullish signal. A 9-day moving average is generally used as a trigger line. say between zero and 100. Divergence happens when the direction of the price trend and the direction of the indicator trend are moving in the opposite direction. A moving average filters out random noise and offers a smoother perspective of the price action. A number of technical indicators are in use. When the MACD crosses this trigger and goes down it is a bearish signal and when it crosses it to go above it. Moving Average Convergence Divergence (MACD): MACD is a momentum indicator and it is made up of two exponential moving averages. Some of the technical indicators are discussed below for the purpose of illustration of the concept: Moving average The moving average is a lagging indicator which is easy to construct and is one of the most widely used. Technical indicators provide an extremely useful source of additional information. A moving average. While some traders just use a single indicator for buy and sell signals. and signal periods where the security is overbought (near 100) or oversold (near zero). it is best to use them along with price movement. By averaging the data. volatility and various other aspects in a security to aid in the technical analysis of trends. chart patterns and other indicators.participants to jump onto the back of the trend. Oscillator indicators move within a range. or when two different moving averages cross over each other. making it much easier to view the underlying trend. The moving average is a smoothing device. The new total is then divided by the total number of days (10) and the resultant average computed. as the name suggests. This indicator measures short-term momentum as compared to longer . a smoother line is produced. Each day. represents an average of a certain series of data that moves through time.

A reading above 70 suggests that a security is overbought. the higher is the buying pressure. However. Capital Asset Pricing Model (CAPM) calculates the required rate of return for any risky asset based on the security’s beta. real estate. the more is the selling pressure. while a reading below 30 suggests that it is oversold. Momentum measures the rate of change of prices by continually taking price differences for a fixed time interval. RSI helps to signal overbought and oversold conditions in a security. and the closer the closing price is to the period's low. signaling upward momentum in the security. The stochastic oscillator is plotted within a range of zero and 100 and signals overbought conditions above 80 and oversold conditions below 20. The idea behind this indicator is that in an uptrend. bonds.5 Compare Arbitrage pricing theory with the Capital asset pricing model. This indicator helps traders to identify whether a security’s price has been unreasonably pushed to its current levels and whether a reversal may be on the way. the Arbitrage Pricing Theory (APT). indexes are imperfect proxies for overall market as no single index includes all capital assets. The problem with CAPM is that such a market portfolio is hypothetical and not observable and we have to use a market index like the S&P 500 or Sensex as a proxy for the market portfolio. which includes all the securities that are available in the world and where the proportion of each security in the portfolio is its market value as a percentage of total market value of all the securities. Stochastic Oscillator: The stochastic oscillator is one of the most recognized momentum indicators. Q. Another criticism of the CAPM is that the various different proxies that are used for the market portfolio do not fully capture all of the relevant risk factors in the economy. including stocks. An alternative pricing theory with fewer assumptions. Arbitrage Pricing Theory (APT) Arbitrage Pricing Theory (APT) are two of the most commonly used models for pricing all risky assets based on their relevant risks. the price should be closing near the highs of the trading range. It can calculate expected return without taking recourse to the market portfolio. signaling downward momentum. This indicator provides information about the location of a current Security closing price in relation to the period's high and low prices. The closer the closing price is to the period's high. has been developed by Stephen Ross. It is a multi-factor model for . the price should be closing near the lows of the trading range. RSI is plotted in a range of 0-100. etc. Traders use the MACD for indicating trend reversals. In downtrends. Beta is a measure of the movement of the security’s return with the return on the market portfolio. Relative Strength Index: The relative strength index (RSI) is another of the well-known momentum indicators. collectibles.term momentum and signals the current direction of momentum.

The APT requires three assumptions: 1) Returns can be described by a factor model. The APT model is different from the CAPM in that it is far less restrictive in its assumptions. the Capital Asset Pricing Model The Arbitrage Pricing Theory (APT) and the Capital Asset Pricing Model are the two most influential theories on stock and asset pricing today. CAPM extended Harry Markowitz’s portfolio theory to introduce the notions of systematic and unsystematic (or unique) risk. the expected return on a stock can be described by the movement of that stock relative to the rest of the stock market. so does the expected return on the stock . Treynor and Lintner contributed to the development of this model. The Capital Asset Pricing Model (CAPM) is a model to explain why capital assets are priced the way they are. 2) There are no arbitrage opportunities. Answer: . An important consequence of the modern portfolio theory as introduced by Markowitz was that the only meaningful aspect of total risk to consider for any individual asset is its contribution to the total risk of a portfolio. 3) There are large numbers of securities that permit the formation of portfolios that diversify the firm-specific risk of individual stocks. the APT makes a lot of sense because it removes the CAPM restrictions and basically states that the expected return on an asset is a function of many factors and the sensitivity of the stock to these factors.and therefore its value to the investor. In the CAPM theory. the Capital Asset Pricing Model is both elegant and relatively simple to calculate. the potentially large number of factors means that more factor sensitivities have to be calculated.determining the required rate of return which means that it takes into account a number of economy wide factors that can affect the security prices. Q. APT allows the individual investor to develop their model that explains the expected return for a particular described by the stock's beta. The CAPM theory is really just a simplified version of the APT. APT calculates relations among expected returns that will rule out arbitrage by investors. This added complexity is the reason arbitrage pricing theory is far less widely used than CAPM. Arbitrage Pricing Theory vs. When compared to the Arbitrage Pricing Theory. Intuitively. As these factors move. William Sharpe. where the only factor considered is the risk of a particular stock relative to the rest of the stock market . However. From a practical standpoint.6 Discuss the different forms of market efficiency. CAPM remains the dominant pricing model used today. There is also no guarantee that all the relevant factors have been identified.

all public information and all private information) refers to the strong form version of market efficiency. the semi-strong form suggests that fundamental analysis is also fruitless. This implies that past rates of return and other market data should have no relationship with future rates of return. What information are we talking about? Information can be information about past prices. EMH asserts that stock prices cannot be predicted with any accuracy. the strong form of EMH suggests that stock prices reflect all information. Lastly. The semi-strong form suggests that stock prices fully reflect all publicly available information and all expectations about the future.Forms of Market Efficiency A financial market displays informational efficiency when market prices reflect all available information about value. In sum. “Prices reflect all available information” means that all financial transactions which are carried out at market prices. . are zero NPV activities. whether it be public (say in SEBI filings) or private (in the minds of the CEO and other insiders). including the historical sequence of prices. It would mean that if the weak form of EMH is correct. The current prices fully reflect all security-market information. Information about past prices refers to the weak form version of market efficiency. information that is public information and information that is private information. This definition of efficient market requires answers to two questions: „what is all available information?‟ & „what does it mean to reflect all available information?‟ Different answers to these questions give rise to different versions of market efficiency. The weak form of EMH states that all past prices. volumes and other market statistics (generally referred to as technical analysis) cannot provide any information that would prove useful in predicting future stock price movements. This implies that decisions made on new information after it is public should not lead to above-average risk-adjusted profits from those transactions. then technical analysis is fruitless in generating excess returns. So even with material non-public information. using the available information. and other market-generated information. knowing what a company generated in terms of earnings and revenues in the past will not help you determine what the stock price will do in the future. “Old” information then is already discounted and cannot be used to predict stock price fluctuations. rates of return. trading volume data. information that consists of past prices and all public information refers to the semi-strong version of market efficiency and all information (past prices.

Q. Answer all the questions. .4 Credits (Book ID: B1208) Assignment Set.2 (60 Marks) Note: Each question carries 10 Marks. Q.3 As an investor how would you select an equity mutual fund scheme? Q.6 Study the performance of any emerging market of your choice.5 Show with the help of an example how portfolio diversification reduces risk.2 Using financial ratios. study the financial performance of any particular company of your interest. Q. Q.Master in Business Administration – Semester 3 MF0010– Security Analysis and Portfolio Management .4 Show how duration of a bond is calculated and how is it used.1 Differentiate between ADRs and GDRs Q.

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