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

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

34% of market capitalization of BSE).The following table summarizes how the portfolio is constructed for an active and a passive investor. therefore. the SENSEX is regarded as the pulse of the domestic stock markets in India. as objectives might change and previously held portfolio might not be the optimal one. Published since January 1. It was first compiled in 1986. Portfolio Revision This step is the repetition of the three previous steps. while its free-float market capitalization was 15.733 billion (US$660 billion) (42. Instead of using a company's outstanding shares it uses its float. are representative of various industrial sectors of the Indian economy. The base year of SENSEX is 1978-79 and the base value is 100. 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. 1986. On 25 July.2 From the website of BSE India. 2001 BSE launched DOLLEX-30. Portfolio performance evaluation This step involves determining periodically how the portfolio has performed over some time period (returns earned vs. government and strategic investors.690 billion (US$348 billion). The base value of the SENSEX is taken as 100 on April 1. a dollar-linked version of SENSEX. It is made of 30 stocks representing a sample of large. risks incurred). 1979. Q. . 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. the market capitalisation of SENSEX was about 29. 5. Answer: SENSEX: Sensex is the stock market index for BSE. such as those held by promoters. The 30 component companies which are some of the largest and most actively traded stocks. liquid and representative companies. explain how the BSE Sensex is calculated. As of 21 April 2011. and its base year as 1978-79. does not include restricted stocks. or shares that are readily available for trading. 4. The free-float method.

Weight Index(%) 0.03 1.77 3.26 3 1. The index has increased by over ten times from June 1990 to the present. which translates to roughly 9% per annum after compensating for inflation.6% per annum. Code Name Sector Factor 50041 ACC Housing Related 0.21 5. the free float market capitalization is regarded as the industry best practice.35 4 53286 DLF Universal Limited Housing related 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. Adj. Free float factor represent the percentage of shares that are readily available for trading. etc. Globally. 2003. Transport Equipments 0. the long-run rate of return on the BSE SENSEX works out to be 18. the index was calculated based on the ‘full market capitalization’ method.35 3 53245 Bharti Airtel Telecom 0.Metal Products & 0.7 as on Feb 26.50 2 50044 Hindalco Industries Ltd.43 1. The calculation of SENSEX involves dividing the free float market capitalization of 30 companies in the index by a number called index divisor. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. Following is the list of the component companies of SENSEX 2010. As per free float capitalization methodology. Free float factor is also referred as adjustment factor.5 5. replacement of scrips. Using information from April 1979 onwards.The divisor is the only link to original base period value of the SENSEX. It keeps the index comparable over time and is the adjustment point for all index adjustments arising out of corporate actions.02 1.Initially. This market capitalization is multiplied by a free float factor to determine the free float market capitalization.75 in .25 8 50030 Grasim Industries Diversified 0. However this was shifted to the free float method with effect from September 1.55 0 50010 BHEL Capital Goods 0.75 0 50001 HDFC Finance 0.90 0 50018 HDFC Bank Finance 0. Metal.85 0 50018 Hero Honda Motors Ltd.

19 4.70 0.90 Jaiprakash Associates Housing Related Larsen & Toubro Capital Goods Mahindra & Mahindra Transport Equipments 0. Metal Products.92 12.25 6.15 Oil & Gas Telecom Oil & Gas 0.71 2. 0.71 1.66 1.55 0.94 1.00 2.03 3.08 7.65 0.86 10.85 1.15 Information Technology 0.63 2.55 Power 0.75 Limited Maruti Suzuki NIIT Technologies NTPC NIIT ONGC Reliance Communications Reliance Industries Transport Equipments 0.61 1.0 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 0.57 2.99 1.50 Information Technology 0.03 2.26 4.03 2.15 Power 0.40 Industries Tata Consultancy Information Technology 0.50 1.20 0.45 Reliance Infrastructure Power State Bank of India Sterlite Industries Finance Metal.87 0.03 3.85 FMCG 0.35 0.70 .25 Services Tata Motors Tata Power Tata Steel Transport Equipments 0.39 1.88 Information Technology 0.50 0. Metal Products 0.45 and Mining Sun Pharmaceutical Healthcare 0.70 Metal.

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

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

If a technical indicator is constructed using the average of the closing prices. Example includes industrial production. Q. money supply etc. Lagging Indicators are economic indicators that change after the economy has already begun to follow a particular pattern or trend. Thus they can help anticipate rising corporate profits and possible stock market price increases. The price data is entered into the formula and a data point is produced. companies tend to expand their operations and in turn generate higher levels of earnings. Some indicators may use only the closing prices. Examples of leading indicators are: Average weekly hours of production workers. They are published by various agencies of the government or by the private sector. economical and social atmosphere of an economy. released at predetermined times according to a schedule. They tend to change directly with the economy. while others incorporate volume and open interest into their formulae. However. where we drop the earliest closing price .have less money with which to purchase goods and services (since high levels of unemployment are common during economic crises). A series of data points over a period of time is required to enable analysis. The three types are leading. one data point does not offer much information. 43 and Rs. Economists use three types of indicators that provide data on the movement of the economy as the business cycle enters different phases. On the other hand. low or closing price over a period of time.33). high. Price data can be any combination of the open. ratio of consumer installment credit outstanding to personal income etc. 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. coincident. 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. Lagging Indicators tend to follow (lag) economic performance. 41. manufacturing and trade sales etc. Thus we can have a 3 period moving average as a technical indicator. Examples: ratio of trade inventories to sales. Security Analysis and Portfolio To some extent the business cycle can be predicted as it is cyclical in nature. Rs. They are used to monitor the health and strength of an economy and they help to evaluate the direction of the business cycle. during times of economic prosperity. Economic indicators are quantitative announcements (released as data). and lagging indicators. 43. say the closing prices of a stock for 3 days are Rs. reflecting the financial. 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. For example. The prediction can be done using economic indicators.4 Identify some technical indicators and explain how they can be used to decide purchase of a company’s stock. as the demand for goods tends to grow.

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

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

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. However. and the closer the closing price is to the period's low. It is a multi-factor model for . The stochastic oscillator is plotted within a range of zero and 100 and signals overbought conditions above 80 and oversold conditions below 20. indexes are imperfect proxies for overall market as no single index includes all capital assets. while a reading below 30 suggests that it is oversold. Traders use the MACD for indicating trend reversals. the higher is the buying pressure. An alternative pricing theory with fewer assumptions. The closer the closing price is to the period's high. The idea behind this indicator is that in an uptrend. the more is the selling pressure.term momentum and signals the current direction of momentum. A reading above 70 suggests that a security is overbought. Q. Momentum measures the rate of change of prices by continually taking price differences for a fixed time interval. real estate. In downtrends. Capital Asset Pricing Model (CAPM) calculates the required rate of return for any risky asset based on the security’s beta. collectibles. Stochastic Oscillator: The stochastic oscillator is one of the most recognized momentum indicators. 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. 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. etc. It can calculate expected return without taking recourse to the market portfolio. signaling downward momentum. RSI helps to signal overbought and oversold conditions in a security. has been developed by Stephen Ross. 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. Relative Strength Index: The relative strength index (RSI) is another of the well-known momentum indicators. Beta is a measure of the movement of the security’s return with the return on the market portfolio. 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 lows of the trading range.5 Compare Arbitrage pricing theory with the Capital asset pricing model. including stocks. the Arbitrage Pricing Theory (APT). the price should be closing near the highs of the trading range. bonds. signaling upward momentum in the security. This indicator provides information about the location of a current Security closing price in relation to the period's high and low prices. RSI is plotted in a range of 0-100.

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

whether it be public (say in SEBI filings) or private (in the minds of the CEO and other insiders). trading volume data. This implies that decisions made on new information after it is public should not lead to above-average risk-adjusted profits from those transactions. all public information and all private information) refers to the strong form version of market efficiency. using the available information.Forms of Market Efficiency A financial market displays informational efficiency when market prices reflect all available information about value. “Prices reflect all available information” means that all financial transactions which are carried out at market prices. the semi-strong form suggests that fundamental analysis is also fruitless. . “Old” information then is already discounted and cannot be used to predict stock price fluctuations. 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. then technical analysis is fruitless in generating excess returns. information that is public information and information that is private information. What information are we talking about? Information can be information about past prices. It would mean that if the weak form of EMH is correct. and other market-generated information. The semi-strong form suggests that stock prices fully reflect all publicly available information and all expectations about the future. information that consists of past prices and all public information refers to the semi-strong version of market efficiency and all information (past prices. including the historical sequence of prices. This implies that past rates of return and other market data should have no relationship with future rates of return. Lastly. Information about past prices refers to the weak form version of market efficiency. The current prices fully reflect all security-market information. the strong form of EMH suggests that stock prices reflect all information. EMH asserts that stock prices cannot be predicted with any accuracy. 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. rates of return. In sum. 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. are zero NPV activities. The weak form of EMH states that all past prices. So even with material non-public information.

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