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Name: SWAMINATHAN K G Roll number: 521062517 Learning centre: 2744 Assignment No.

: Set 1

ASSIGNMENTS Subject code: MB0050

(Book ID: B1208) (4 credits)

Marks 60 SUBJECT NAME: RESEARCH METHODOLOGY Note: Each Question carries 10 marks Q1)a. Differentiate between nominal, ordinal, interval and ratio scales, with an example of each. b. What are the purposes of measurement in social science research? a. Types of scales: Ans) There are four types of data that may be gathered in social research, each one adding more to the next. Thus ordinal data is also nominal, and so on. Nominal The name 'Nominal' comes from the Latin nomen, meaning 'name' and nominal data are items which are differentiated by a simple naming system. The only thing a nominal scale does is to say that items being measured have something in common, although this may not be described. Nominal items may have numbers assigned to them. This may appear ordinal but is not -these are used to simplify capture and referencing. Nominal items are usually categorical, in that they belong to a definable category, such as 'employees'. Example The number pinned on a sports person. A set of countries.

Ordinal Items on an ordinal scale are set into some kind of order by their position on the scale. This may indicate such as temporal position, superiority, etc. The order of items is often defined by assigning numbers to them to show their relative position. Letters or other sequential symbols may also be used as appropriate.

Ordinal items are usually categorical, in that they belong to a definable category, such as '1956 marathon runners'. You cannot do arithmetic with ordinal numbers -- they show sequence only. Example The first, third and fifth person in a race. Pay bands in an organization, as denoted by A, B, C and D.

Interval Interval data (also sometimes called integer) is measured along a scale in which each position is equidistant from one another. This allows for the distance between two pairs to be equivalent in some way. This is often used in psychological experiments that measure attributes along an arbitrary scale between two extremes. Interval data cannot be multiplied or divided. Example My level of happiness, rated from 1 to 10. Temperature, in degrees Fahrenheit.

Ratio In a ratio scale, numbers can be compared as multiples of one another. Thus one person can be twice as tall as another person. Important also, the number zero has meaning. Thus the difference between a person of 35 and a person 38 is the same as the difference between people who are 12 and 15. A person can also have an age of zero. Ratio data can be multiplied and divided because not only is the difference between 1 and 2 the same as between 3 and 4, but also that 4 is twice as much as 2. Interval and ratio data measure quantities and hence are quantitative. Because they can be measured on a scale, they are also called scale data. Example A person's weight The number of pizzas I can eat before fainting

b. Purpose of measurement in social science. One of the primary purposes of classifying variables according to their level or scale of measurement is to facilitate the choice of a statistical test used to analyze the data. There are certain statistical analyses which are only meaningful for data which are measured at certain measurement scales. For example, it is generally inappropriate to compute the mean for Nominal variables. Suppose you had 20 subjects, 12 of which were male, and 8 of which were female. If you assigned males a value of '1' and females a value of '2', could you compute the mean sex of subjects in your sample? It is possible to compute a mean value, but how meaningful would that be? How would you interpret a mean sex of 1.4? When you are examining a Nominal variable such as sex, it is more appropriate to compute a statistic such as a percentage (60% of the sample was male). When a research wishes to examine the relationship or association between two variables, there are also guidelines concerning which statistical tests are appropriate. For example, let's say a University administrator was interested in the relationship between student gender (a Nominal variable) and major field of study (another Nominal variable). In this case, the most appropriate measure of association between gender and major would be a Chi-Square test. Let's say our University administrator was interested in the relationship between undergraduate major and starting salary of students' first job after graduation. In this case, salary is not a Nominal variable; it is a ratio level variable. The appropriate test of association between undergraduate major and salary would be a one-way Analysis of Variance (ANOVA), to see if the mean starting salary is related to undergraduate major. Finally, suppose we were interested in the relationship between undergraduate grade point average and starting salary. In this case, both grade point average and starting salary are ratio level variables. Now, neither Chi-square nor ANOVA would be appropriate; instead, we would look at the relationship between these two variables using the Pearson correlation coefficient. Q2) a. What are the sources from which one may be able to identify research problems? b. Why literature survey is important in research? Ans: Identifying research Problem This involves the identification of a general topic and formulating it into a specific research problem. It requires thorough understanding of the problem and rephrasing it in meaningful terms from an analytical point of view. Types of Research Projects

those that relate to states of nature those which relate to relationships between variables

In understanding the problem, it is helpful to discuss it with colleagues or experts in the field. It is also necessary to examine conceptual and empirical literature on the subject. After the literature review, the researcher is able to focus on the problem and phrase it in analytical or operational terms. The task of defining the research problem is of greatest importance in the entire research process. Being able to define the problem unambiguously helps the researcher in discriminating relevant data from irrelevant ones. Extensive literature review Review of literature is a systematic process that requires careful and perceptive reading and attention to detail. In the review of the literature, the researcher attempts to determine what others have learned about similar research problems. It is important in the following ways:

specifically limiting and identifying the research problem and possible hypothesis or research questions i.e. sharpening the focus of the research. informing the researcher of what has already been done in the area. This helps to avoid exact duplication.

If one had the literature and exercised enough patience and industry in reviewing available literature, it may well be that his problem has already been solved by someone somewhere some time ago and he will save himself the trouble. Nwana (1982).

Providing insights into possible research designs and methods of conducting the research and interpreting the results. Providing suggestions for possible modifications in the research to avoid unanticipated difficulties.

The library is the most likely physical location for the research literature. Within the library there is access to books, periodicals, technical reports and academic theses. Other sources are the Education Index and the Educational Resources information centre (ERIC). Computerassisted searchers of literature have become very common today. They have the advantage of comprehensiveness and speed. They are also very cost-effective in terms of time and effort although access to some of the databases requires payment. Irrespective of the sources of the literature, ethics of research require that the source is acknowledged through a clear system of referencing. b. Why Literature survey is important in research? Doing a literature survey before you begin your investigation enables you to take advantage of the unique human capacity to pass on detailed written information from one generation to another. Reading all the knowledge that's accumulated so far on the problem you want to study can be time-consuming and even tedious. But careful evaluation of that material helps make your investigation worthwhile by alerting you to knowledge already gained and problems already encountered in your areas of interest. A literature survey amounts to reading available material on a given topic, analyzing and organizing findings, and producing a summary. There are many sources for literature reviews, including journals of general interest in each discipline, such as the American Political Science Review. There are also journals for specific topics such as the Leadership

and Organization Development Journal. Governments publish great quantities of data on many topics. The United Nations and the United States Government Printing Office are two major sources. In addition, businesses and private organizations gather and publish information you might find useful. For certain problems you may want to search through popular or non-scholarly periodicals as well. While it's customary to include only data from sources that actually research the problem in a precise fashion, articles in more popular sources may provide interesting insight or orientations. Talking to knowledgeable people may also give you information that helps you formulate your problem. Thoroughness is the key. Most libraries have staff trained in information retrieval who can help find sources and suggest strategies to review the literature. The Internet, of course, now allows easy access to limitless information on given topics. Thoroughness in your review means not only finding all current publications on a topic but locating earlier writing as well. There's no easy rule for how long ago literature was published on your topic. The time varies from problem to problem. A useful way to locate past as well as current writing is to begin with the most current sources likely to contain relevant material. Then, follow these authors' footnotes and bibliographies. At some point in this search you'll find the material is beginning to be only peripherally related to your current interest or that authors claim originality for their work. Of course, doing a goodliterature surveyis easier when you know a great deal about the subject already. In such a case you'd probably be familiar with publications and even other people who do research in your area of interest. But for the novice, efficient use of library/Internet services and organizing how they check sources are especially important skills. Having located literature, keeping a checklist of useful information will help you read each source. You might ask yourself, particularly for research articles: 1. 2. 3. 4. 5. 6. 7. 8. 9. What was the exact problem studied? How were the topics of interest defined? What did the authors expect to find? How were things measured? What research did this author cite? Have you read it? Who were the subjects of study? What do the results show? Do the data presented agree with the written conclusions? What were the limitations of the study?

A thorough literature survey should demonstrate that you've carefully read and evaluated each article or book. Because research reports can be tedious and difficult to understand for new researchers, many tend to read others' conclusions or summaries and take the author's word that the data actually support the conclusions. Careful reading of both tables and text for awhile will convince you they don't always agree. Sometimes data are grossly misinterpreted in the text, but on other occasions authors are more subtle. Consider, for example, the following statements: Fully 30 percent of the sample said they did not vote. Only 30 percent of the sample said they did not vote.

The percentage is the same, but the impression conveyed is decidedly different. Reading the actual data before accepting the author's conclusions will help prevent some of these errors of interpretation from creeping into your own research. It's important that after you finish your reading, you're able to write your literature survey in a way that's clear, organizing what you know about the content and methods used to study your problem. You may find it helpful to record information about each source on a separate card or piece of paper so that information can later be reshuffled, compared, and otherwise reorganized. Note in most journal articles that what probably began as a long literature survey is usually condensed on the first few pages of the research report, explaining previous research on the problem and how the current study will contribute. You, too, want to add to this growing body of knowledge we call social science by a creative summary of what's been accomplished by others as well as by your own research.

Q3) a. What are the characteristics of a good research design? b. What are the components of a research design?
Ans) Research Design Definition

A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose witheconomy in procedureIs the conceptual structure within which research is conducted; it constitutes theblueprint for the collection, measurement and analysis of data more explicitly: i.What is the study about? ii.Why is the study being conducted? iii.Where will the study be carried out? iv.What type of data is required? v.Where can the required data be found?
Components of research design %20design&source=web&cd=3&ved=0CDIQFjAC&url=http%3A%2F %2Fweek_4.doc&ei=KgOgTo-aEofqrAeFkbWNAw&usg=AFQjCNG1ctNqNjUq_ilsO4muicz4Z2eBA&sig2=RFuXRcsnlsSIOe9zWHhr5A&cad=rja 4. a. Distinguish between Doubles sampling and multiphase sampling.

b. What is replicated or interpenetrating sampling? 5.

[ 5 marks] [ 5 marks]

a. How is secondary data useful to researcher?

[ 5 marks]

b. What are the criteria used for evaluation of secondary data? 6.

[ 5 marks]

What are the differences between observation and interviewing as methods of data collection? Give two specific examples of situations where either observation or interviewing would be more appropriate. [10 marks].

Master in Business Administration Semester 3 MF0051 - (Book ID: B1207)

Assignment Set- 1 (60 Marks) Note: Each question carries 10 Marks. Answer all the questions.
Question 1: Distinguish between fraud and misrepresentation. Answer: Distinction between fraud and misrepresentation: Sometimes the terms fraud and misrepresentation are used inter-changeably by readers however they are actually different. There is not a much difference between the two but a little one as misrepresentation does not directly mean fraud. Below is a table on the salient points to distinguish the terms: Fraud The word fraud comes from the Middle English word fraude taken from the Old French and derived from the Latin fraus. The word fraud means a deliberate form of deception that is practiced to secure some sort of unlawful and unfair gain. Implies on intention to deceive, hence it is intentional or willful wrong. A civil wrong which entitles a party to claim damages in addition to the right to rescind the contract. In fraud, the person making the representation does not himself believe in the truth of the statement he is making. n cases of fraud, the person making the statement is a complete liar and is making the statement to deceive others to enter into a contract Deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage. Misrepresentation Misrepresentation is a type of lying or falsehood in which a person says or does something that would lead another person to believe something that is not in accordance with the facts. It is an innocent wrong without any intention to deceive. The person making the statement believes it to be true. It gives only the right to rescind the contract and there can be no suit for damages. In situations of innocent misrepresentation the person making the statement may believe that what he is saying is true. This is due to the fact that the person making the statement is simply repeating what another person has asserted to be true A misrepresentation or concealment with reference to some fact material to a transaction that is made with knowledge of its falsity or in reckless disregard of its truth or falsity and with the intent to deceive another and that is reasonably relied on by the other who is injured thereby. Misrepresentation may not have malicious intent to deceive if it happens negligently through a misstatement and/or omission of a material fact(s). Types of misrepresentation are: Fraudulent misrepresentation Negligent misrepresentation

Fraud always has malicious intent.

Types of fraud are: Fraud is fraud until you get into a legal issue. Then there are differences but there

is only one type of fraud in realty.

Innocent misrepresentation

Question 2: What are the remedies for breach of contract? Answer: Businesses both individual and corporate enter into business relationships with either individuals or businesses to enable them to carry on their day-to-day commercial transactions. Most of these relationships result in contracts that have legal consequences. Most contracts do not have to be in writing to be enforceable. Definition of a Contract: A contract is a legally enforceable agreement between two or more parties. The core of most contracts is a set of mutual promises (in legal terminology, consideration). The promises made by the parties define the rights and obligations of the parties. For every contract there must be an agreement. An agreement is defined as every promise and every set of promises forming the consideration for each other and a promise is an accepted proposal. Contracts are enforceable in the courts. If one party meets its contractual obligations and the other party doesnt (breaches the contract), the nonbreaching party is entitled to receive relief through the courts. Generally, the non-breaching partys remedy for breach of contract is monetary damages that will put the non-breaching party in the position it would have enjoyed if the contract had been performed. Under special circumstances, a court will order the breaching party to perform its contractual obligations. Because contracts are enforceable, parties who enter into contracts can rely on contracts in structuring their business relationships. Essentials of a Contract: The Indian Contract Act -1872 defines contract as an agreement enforceable by law. The essentials of a (valid) contract are: intention to create legal relations; offer and acceptance; consideration; capacity to enter into a contract free consent of the parties lawful object of the agreement

Remedy Clauses: These clauses state what rights the non-breaching party has if the other party breaches the contract. In contracts for the sale of goods, remedy clauses are usually designed to limit the sellers liability for damages. In a contract the agreement being enforceable by law, each party to the contract is legally bound to perform his part of the obligation. The non-performance of the duty undertaken by a party in a contract amounts to breach of contract for which it can be made liable. Remedies for breach of contract: The legal remedies for breach of contract are: a) Damages


b) Specific performance of the contract; and c) Injunction. When a contract has been breached, the party who suffers by such breach is entitled to receive, from the party who has breached the contract, compensation for any loss or damage caused to him thereby, being loss or damages which naturally arose in the usual course of things from such breach or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss of damage sustained by reason of the breach. A person who rightfully rescinds a contract is entitled to compensation for any damage, which he has sustained through non-fulfillment of the contract. Liquidated damages and penal stipulations: If a sum is named in the contract as the amount to be paid in case of breach of contract, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage of loss is proved to have been caused thereby, to receive, from the party who has broken the contract, reasonable compensation, not exceeding the amount so named or the penalty stipulated for. A stipulation for increased interest from the date of default may be regarded as a stipulation by way of penalty. The court is empowered to reduce it to an amount which is reasonable in the circumstances. Specific performance: In certain special cases (dealt with in the Specific Relief Act, 1963), the court may direct against the party in default specific performance of the contract, that is to say, the party may be directed to perform the very obligation which he has undertaken, by the contract. This remedy is discretionary and granted in exceptional cases. Specific performance means actual execution of the contract as agreed between the parties. Specific Performance of any contract may, in the discretion of the court be enforced in the following situations When there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; or When the act agreed to be done is such that monetary compensation for its nonperformance would not afford adequate relief. Instances where compensation would be deemed adequate relief are: Agreement as a consequence of a breach by a landlord for repair of the rented premises; Contract for the sale of any goods, for instance machinery or goods.

Exceptions: A contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms, cannot be specifically enforced. Another situation when a contract cannot be specifically enforced is where the contract is in its nature determinable. A contract is said to be determinable, when a party to the


contract can put it to an end. A contract the performance of which involves the performance of a continuous duty, which the Court cannot supervise, cannot be specifically enforced. Persons who cannot obtain Specific Performance: The specific performance of a contract cannot be obtained in favor of a person who could not be entitled to recover compensation for the breach of contract. Specific performance of a contract cannot be enforced in favor of a person who has become incapable of performing the contract that on his part remains to be performed, or who violates any essential term of the contract that on his part remains to be performed, or who acts fraudulently despite the contract, or who willfully acts at variance with, or in subversion, of the relation intended to be established by the contract. I hope this gives you a relevant overview into the key aspect of business contracts and if one takes adequate care when drafting contracts; needless to say relationships will be better and probably more profitable.

Question 3: Distinguish between indemnity and guarantee. Answer: Introduction: Guarantees and indemnities are both long established forms of what the law terms surety ship. There are important legal distinctions between them. Append below some salient points pertaining to the difference/distinction between Indemnity and Guarantee: Distinction between Indemnity and Guarantee: Indemnity Section 124 of the Indian Contract Act 1872 defines a "contract of indemnity" as a contract by which one party promises to save the other from loss caused to him by the conduct of the Promisor himself, or by the conduct of any other person. e.g. = 'x' contracts to indemnify 'y' against the consequences of any legal proceedings which may take against B in respect of a certain sum of Rs.200/=. Guarantee Section 126 of the Indian Contract Act 1872 defines a contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default. The person who gives the guarantee is called the surety; the person in respect of whose default the guarantee is given is called the principal debtor, and the person to whom the guarantee is given is called the creditor. A guarantee may be either oral or written. e.g., 'P' lends Rs. 5000/= to 'Q' and 'R' promises to 'P' that if 'Q' does not pay the money back then 'R' will do so. There are three parties namely the surety, principal debtor and the creditor The liability of the surety is secondary. The surety is liable only if the principal debtor makes a default. The primary

Indemnity comprise only two parties- the indemnifier and the indemnity holder. Liability of the indemnifier is primary


The indemnifier need not necessarily act at the request of the indemnified. The possibility of any loss happening is the only contingency against which the indemnifier undertakes to indemnify. An indemnity is for reimbursement of a loss In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favor. In a contract of indemnity, the indemnifier promises without the request of debtor.

liability being that of the principal debtor. The surety give guarantee only at the request of the principal debtor There is an existing debt or duty, the performance of which is guarantee by the surety A guarantee is for security of the creditor. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor. Contract of Guarantee is for security of a debt or performance of promise

Question 4: What is the distinction between cheque and bill of exchange? Answer: Exchange of goods and services is the basis of every business activity. Goods are bought and sold for cash as well as on credit. All these transactions require flow of cash either immediately or after a certain time. In modern business, large number of transactions involving huge sums of money takes place every day. It is quite inconvenient as well as risky for either party to make and receive payments in cash. Therefore, it is a common practice for businessmen to make use of certain documents as means of making payment. Some of these documents are called negotiable instruments. In this lesson let us learn about these documents. Distinction between Cheque and bill of exchange Cheque Bill of Exchange It is drawn on a banker It may be drawn on any party or individual. It has three parties - the drawer, the There are three parties - the drawer, the drawee, and payee. drawee, and the payee. The drawer can also draw a bill in his own name thereby he himself becomes the payee. Here the words in the bill would be Pay to us or order. In a bill where a time period is mentioned, just like the above specimen, is called a Time Bill. But a bill may be made payable on demand also. This is called a Demand Bill. t is seldom drawn in sets It does not require acceptance by the drawee. Days of grace are not allowed to a banker No stamp duty is payable on checks Broadly speaking, cheques are of four types. a) Open cheque, and b) Crossed cheque. c) Bearer cheque d) Order cheque Foreign bills are drawn in sets It must be accepted by the drawee before he can be made liable to pay the bill. Three days of grace are always allowed to the drawee. Stamp duty has to be paid on bill of


It is usually drawn on the printed format

exchange. It may be drawn in any paper and need not necessarily be printed.

Question 5: Distinguish between companies limited by shares and companies limited by guarantee. Answer: The Companies Act, 1956 defines the word company as a company formed and registered under the Act or an existing company formed and registered under any of the previous company laws (Sec.3). This definition does not bring out the meaning and nature of the company into a clear perspective. Also Sec.12 permits the formation of different types of companies. These may be: Companies limited by shares Companies limited by guarantee and Unlimited companies. The vast majority of companies in India are with limited liability by shares. Distinction between Cheque and bill of exchange Companies limited by shares Companies limited by guarantee A company limited by guarantee is Limited by shares is defined by: a normally incorporated for non-profit company that has shareholders, and that making functions. The company has no the financial obligation of the shareholders share capital. A company limited by to creditors of the company is restricted to guarantee has members rather than the capital invested in the first place (i.e. shareholders. The members of the the specified value of the shares and any company guarantee/undertake to premium paid off in exchange for the issue contribute a predetermined sum to the of the shares by the company). liabilities of the company which becomes Shareholder's individuals assets are due in the event of the company being thereby secured in the case of the wound up. company's insolvency, but revenues invested in the company will be The Memorandum normally includes a unrecoverable. non-profit distribution clause and these Limited companies could be either private companies are usually formed by clubs, or public. A private Ltd. (limited company professional, trade or research disclosure) involves are less demanding, associations. but for this reason its shares might NOT be provided to the general public (and consequently can't be listed on a national stock market exchange). This is the wellknown distinctive characteristic between a private limited company and a public limited company. The absolute majority of trading corporations are private companies limited by shares. Companies limited by shares are more Companies limited by guarantee are less popular popular than companies limited by shares. Companies limited by shares are profit Companies limited by guarantee are nonmaking companies. profit making


In case of companies limited by shares, there are shareholders. Companies limited by shares can engage in legal trades and have general clauses.

Companies limited by guarantee have members, and not share holders There is no share capital in case of companies limited by guarantee and it also has self-imposed restrictions

Question 6: What is the definition of cyber-crime? Answer: Introduction: Crime and criminality have been associated with man since his fall. Crime remains elusive and ever strives to hide itself in the face of development. Different nations have adopted different strategies to contend with crime depending on their nature and extent. One thing is certain, it is that a nation with high incidence of crime cannot grow or develop. That is so because crime is the direct opposite of development. It leaves a negative social and economic consequence. Cybercrime: Cybercrime is defined as crimes committed on the internet using the computer as either a tool or a targeted victim. It is very difficult to classify crimes in general into distinct groups as many crimes evolve on a daily basis. Even in the real world, crimes like rape, murder or theft need not necessarily be separate. However, all cybercrimes involve both the computer and the person behind it as victims; it just depends on which of the two is the main target. Hence, the computer will be looked at as either a target or tool for simplicitys sake. For example, hacking involves attacking the computers information and other resources. It is important to take note that overlapping occurs in many cases and it is impossible to have a perfect classification system. Computer as a tool: When the individual is the main target of Cybercrime, the computer can be considered as the tool rather than the target. These crimes generally involve less technical expertise as the damage done manifests itself in the real world. Human weaknesses are generally exploited. The damage dealt is largely psychological and intangible, making legal action against the variants more difficult. These are the crimes which have existed for centuries in the offline. Scams, theft, and the likes have existed even before the development in high-tech equipment. The same criminal has simply been given a tool which increases his potential pool of victims and makes him all the harder to trace and apprehend. Computer as a target: These crimes are committed by a selected group of criminals. Unlike crimes using he computer as a tool, these crimes requires the technical knowledge of the perpetrators. These crimes are relatively new, having been in existence for only as long as computers have - which explains how unprepared society and the world in general is towards combating these crimes. There are numerous crimes of this nature committed daily on the internet. But it is worth knowing that Africans and indeed


Nigerians are yet to develop their technical knowledge to accommodate and perpetrate this kind of crime. The internet in India is growing rapidly. It has given rise to new opportunities in every field we can think of be it entertainment, business, sports or education. There are two sides to a coin. Internet also has its own disadvantages. One of the major disadvantages is Cybercrime illegal activity committed on the internet. The internet, along with its advantages, has also exposed us to security risks that come with connecting to a large network. Computers today are being misused for illegal activities like e-mail espionage, credit card fraud, spams, and software piracy and so on, which invade our privacy and offend our senses. Criminal activities in the cyberspace are on the rise. Here we publish an article by Nandini Ramprasad in series for the benefit of our netizens. Cybercrimes can be basically divided into 3 major categories: 1) Cybercrimes against persons 2) Cybercrimes against property. 3) Cybercrimes against government. Cybercrimes committed against persons include various crimes like transmission of childpornography, harassment of any one with the use of a computer such as e-mail. The trafficking, distribution, posting, and dissemination of obscene material including pornography and indecent exposure, constitutes one of the most important Cybercrimes known today. The potential harm of such a crime to humanity can hardly be amplified. This is one Cybercrime which threatens to undermine the growth of the younger generation as also leave irreparable scars and injury on the younger generation, if not controlled. In the United States alone, the virus made its way through 1.2 million computers in onefifth of the country's largest businesses. David Smith pleaded guilty on Dec. 9, 1999 to state and federal charges associated with his creation of the Melissa virus. There are numerous examples of such computer viruses few of them being "Melissa" and "love bug". A Mumbai-based upstart engineering company lost a say and much money in the business when the rival company, an industry major, stole the technical database from their computers with the help of a corporate cyber spy. Unauthorized access: Using one's own programming abilities as also various programs with malicious intent to gain unauthorized access to a computer or network are very serious crimes. Similarly, the creation and dissemination of harmful computer programs which do irreparable damage to computer systems is another kind of Cybercrime. Software piracy is also another distinct kind of Cybercrime which is perpetuated by many people online who distribute illegal and unauthorized pirated copies of software. Professionals who involve in these cybercrimes are called crackers and it is found that many of such professionals are still in their teens. A report written near the start of the Information Age warned that America's computers were at risk from crackers. It said that computers that "control (our) power delivery, communications, aviation and financial services (and) store vital information, from medical re-cords to business plans, to criminal records", were vulnerable from many sources, including deliberate attack.


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 investors 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 daughters college education would be less likely to take a large risk because he has a shorter time horizon. Risk Tolerance - Risk tolerance is an investors 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. A conservative investor, or one with a low-risk tolerance, tends to favour investments that will preserve his or her original investment. The conservative investors keep a "bird in the hand," while aggressive investors seek "two in the bush." While setting the investment policy, the investor also selects the portfolio management style (active vs. passive management). 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, based upon research, investigation and analysis.

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, by holding all or a representative sample of the securities in the index or asset class. This portfolio management style does not use market timing or stock selection strategies.
2. Performing Security Analysis This step is the security selection decision: Within each asset type, identified in the asset allocation decision, how does an investor select which securities to purchase. Security analysis involves examining a number of individual securities within the broad categories of financial assets identified in the previous step. One purpose of this exercise is to identify those securities that currently appear to be mispriced. Security analysis is done either using Fundamental or Technical analysis (both have been discussed in subsequent units). Fundamental analysis is a method used to evaluate the worth of a security by studying the financial data of the issuer. It scrutinizes the issuer's income and expenses, assets and liabilities, management, and position in its industry. In other words, it focuses on the basics of the business. Technical analysis is a method used to evaluate the worth of a security by studying market statistics. Unlike fundamental analysis, technical analysis disregards an issuer's financial statements. Instead, it relies upon market trends to ascertain investor sentiment to predict how a security will perform. 3. Portfolio Construction This step identifies those specific assets in which to invest, as well as determining the proportion of the investors wealth to put into each one. Here selectivity, timing and diversification issues are addressed. Selectivity refers to security analysis and focuses on price movements of individual securities. 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 investors risk is minimized.

The following table summarizes how the portfolio is constructed for an active and a passive investor.

4. Portfolio Revision This step is the repetition of the three previous steps, as objectives might change and previously held portfolio might not be the optimal one. 5. Portfolio performance evaluation

This step involves determining periodically how the portfolio has performed over some time period (returns earned vs. risks incurred).
Q.2 From the website of BSE India, explain how the BSE Sensex is calculated.



SENSEX: Sensex is the stock market index for BSE. It was first compiled in 1986. It is made of 30 stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. 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 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX is taken as 100 on April 1, 1979, and its base year as 1978-79. On 25 July, 2001 BSE launched DOLLEX-30, a dollar-linked version of SENSEX. As of 21 April 2011, the market capitalisation of SENSEX was about 29,733 billion (US$660 billion) (42.34% of market capitalization of BSE), while its free-float market capitalization was 15,690 billion (US$348 billion). 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 methoda variation of the market capitalisation method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors. Initially, the index was calculated based on the full market capitalization method. However this was shifted to the free float method with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice. As per free float capitalization methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also referred as adjustment factor. Free float factor represent the percentage of shares that are readily available for trading. The calculation of SENSEX involves dividing the free float market capitalization of 30 companies in the index by a number called index divisor.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, replacement of scrips, etc. The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE SENSEX works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.


Following is the list of the component companies of SENSEX as on Feb 26, 2010. Code Name 50041 0 50010 3 53245 4 53286 8 50030 0 50001 0 50018 0 50018 2 50044 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 ACC BHEL Bharti Airtel DLF Universal Limited Grasim Industries HDFC HDFC Bank Sector Housing Related Capital Goods Telecom Housing related Diversified Finance Finance Adj. Factor 0.55 0.35 0.35 0.25 0.75 0.90 0.85 0.50 Weight Index(%) 0.77 3.26 3 1.02 1.5 5.21 5.03 1.43 1.75 2.08 7.86 10.26 4.99 1.25 6.85 1.71 1.71 2.03 2.03 2.03 3.87 0.92 in

Hero Honda Motors Ltd. Transport Equipments Hindalco Industries Ltd.

Metal,Metal Products & 0.7 Mining 0.50 1.00

Hindustan Lever Limited FMCG ICICI Bank Infosys ITC Limited Jaiprakash Associates Larsen & Toubro Mahindra Limited & Mahindra Finance

Information Technology 0.85 FMCG Housing Related Capital Goods Transport Equipments Transport Equipments 0.70 0.55 0.90 0.75 0.50

Maruti Suzuki NIIT Technologies NTPC NIIT ONGC Reliance Communications

Information Technology 0.15 Power 0.15

Information Technology 0.15 Oil & Gas Telecom 0.20 0.35


50032 5 50039 0 50011 2 50090 0 52471 5 53254 0 50057 0 50040 0 50047 0 50768 5

Reliance Industries Reliance Infrastructure State Bank of India Sterlite Industries

Oil & Gas Power Finance

0.50 0.65 0.45

12.94 1.19 4.57 2.39 1.03 3.61 1.66 1.63 2.88 1.61

Metal, Metal Products, 0.45 and Mining

Sun Pharmaceutical Healthcare 0.40 Industries Tata Consultancy Information Technology 0.25 Services Tata Motors Tata Power Tata Steel Wipro Transport Equipments Power 0.55 0.70

Metal, Metal Products & 0.70 Mining Information Technology 0.20

Q.3 Perform an economy analysis on Indian economy in the current situation.

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


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. The currency of a country appreciates when there is more foreign currency coming into the country than leaving it. Therefore, a surplus in the current or capital account causes the currency to strengthen; 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. All other things being equal, an increase in money supply causes the interest rates to fall; a decrease causes the interest rates to rise. If interest rates are low, the cost of borrowing by businesses is not expensive, and companies can easily borrow to expand and develop their activities. On the other hand, when the cost of borrowing becomes too high (when the interest rates go up), borrowing may become too costly and plans for expansion are postponed. Interest rates also have a significant effect on the share markets. In very broad terms, share prices improve when interest rates fall and decline when interest rates increase. 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, if interest payments reduce. 2 Business cycle and leading coincidental and lagging indicators All economies experience recurrent periods of expansion and contraction. This recurring pattern of recession and recovery is called the business cycle. The business cycle consists of expansionary and recessionary periods. When business activity reaches a high point, it peaks; a low point on the cycle is a trough. Troughs represent the end of a recession and the beginning of an expansion. Peaks represent the end of an expansion and the beginning of a recession. In the expansion phase, business activity is growing, production and demand are increasing, and employment is expanding. Businesses and consumers normally borrow more money for investment and consumption purposes. As the cycle moves into the peak, demand for goods overtakes supply and prices rise. This creates inflation. During inflationary times, there is too much money chasing a limited amount of goods. Therefore, businesses are able to charge more for their items causing prices to rise. This, in turn, reduces the purchasing power of the consumer. As prices rise, demand slackens which causes economic activity to decrease. The cycle then enters the recessionary phase. As business activity contracts, employers lay off workers (unemployment increases) and demand further slackens. Usually, this causes prices to fall. The cycle enters the trough. Eventually, lower prices stimulate demand and the economy moves into the expansion phase. The performance of an investment is influenced by the business cycle. The direction in which an economy is heading has a significant impact on companies performance and ability to deliver earnings. If the economy is in a recession, it is likely that many business sectors will fail to generate profits. This is because the demand for most products decreases during economic declines, since people have less money with which to purchase goods and services (since high levels of unemployment are common during economic crises). On the other hand, during times of economic prosperity, companies tend to expand their operations and in turn generate higher levels of earnings, as the demand for goods tends to grow. Security Analysis and Portfolio To some extent the business cycle can be predicted as it is cyclical in nature. The prediction can be done using economic indicators. Economic indicators are quantitative announcements (released as data), released at predetermined times according to a schedule, reflecting the financial, economical and social atmosphere of an economy. They are published by various agencies of the government or by the private sector. They are used to monitor the health and strength of an economy and they help to evaluate the direction of the business cycle. Economists use three types of indicators that provide data on the movement of the economy as the business cycle enters different phases. The three types are leading, coincident, and lagging indicators. 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. Thus they can help anticipate rising corporate profits and possible stock market price increases. Examples of leading indicators are: Average weekly hours of production workers, money supply etc. Coincident indicators usually mirror the movements of the business cycle. They tend to change


directly with the economy. Example includes industrial production, manufacturing and trade sales etc.

Lagging Indicators are economic indicators that change after the economy has already begun to follow a particular pattern or trend. Lagging Indicators tend to follow (lag) economic performance. Examples: ratio of trade inventories to sales, ratio of consumer installment credit outstanding to personal income etc.
Q.4 Identify some technical indicators and explain how they can be used to decide purchase of a companys stock.

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. Price data can be any combination of the open, high, low or closing price over a period of time. Some indicators may use only the closing prices, while others incorporate volume and open interest into their formulae. The price data is entered into the formula and a data point is produced. For example, say the closing prices of a stock for 3 days are Rs. 41, Rs. 43 and Rs. 43. If a technical indicator is constructed using the average of the closing prices, then the average of the 3 closing prices is one data point ((41+43+43)/3=42.33). However, one data point does not offer much information. A series of data points over a period of time is required to enable analysis. Thus we can have a 3 period moving average as a technical indicator, where we drop the earliest closing price and use the next closing price for calculations. By creating a time series of data points, a comparison can then be made between present and past levels. Technical indicators are usually shown in a graphical form above or below a securitys price chart for facilitating analysis. Once shown in graphical form, an indicator can then be compared with the corresponding price chart of the security. Sometimes indicators are plotted on top of the price plot for a more direct comparison. Technical indicators measure money flow, trends, volatility and momentum etc. They are used for two main purposes: to confirm price movement and the quality of chart patterns, and to form buy and sell signals. A technical indicator offers a different perspective from which to analyze the price action. Some, such as moving averages, are derived from simple formulae and they are relatively easy to understand. Others, like stochastic have complex formulae and require more effort to fully understand and appreciate. Technical indicators can provide unique perspective on the strength and direction of the underlying price action. Indicators filter price action with formulae. Therefore they are derivative measures and not direct reflections of the price action. This should be taken into account when analyzing the indicators. Any analysis of an indicator should be taken with the price action in mind. There are two main types of indicators: leading and lagging. A leading indicator precedes price movements; therefore they are used for prediction. A lagging indicator follows price movement and therefore is a confirmation. The main benefit of leading indicators is that they provide early signaling for entry and exit. Early signals can forewarn against a potential strength or weakness. Leading indicators can be used in trending markets. In a market that is trending up, the leading indicator helps identify oversold conditions for buying opportunities. In a market that is trending down, leading indicators can help identify overbought situations for selling opportunities. Some of the more popular leading indicators include Relative Strength Index (RSI) and Stochastic Oscillator. Lagging indicators follow the price action and are commonly referred to as trend-following indicators. Lagging indicators work best when the markets or securities develop strong trends. They are designed to get traders in and keep them in as long as the trend is intact. As such, these indicators are not effective in trading or sideways markets. Some popular trend-following indicators include moving averages and Moving Average Convergence Divergence (MACD). Technical indicators are constructed in two ways: those that fall in a bounded range and those that do not. The technical indicators that are bound within a range are called oscillators. Oscillators are used as an overbought / oversold indicator. A market is said to be overbought when prices have been trending higher in a relatively steep fashion for some time, to the extent that the number of market participants long of the market significantly outweighs those on the sidelines or holding short positions. This means that there are fewer participants to jump onto the back of the trend. The oversold condition is just the opposite. The market has been trending lower for some time and is


running out of fuel for further price declines. Oscillator indicators move within a range, say between zero and 100, and signal periods where the security is overbought (near 100) or oversold (near zero). Oscillators are the most common type of technical indicators. The technical indicators that are not bound within a range also form buy and sell signals and display strength or weakness in the market, but they can vary in the way they do this. The two main ways that technical indicators are used to form buy and sell signals is through crossovers and divergence. Crossovers occur when either the price moves through the moving average, or when two different moving averages cross over each other. Divergence happens when the direction of the price trend and the direction of the indicator trend are moving in the opposite direction. This indicates that the direction of the price trend is weakening. Technical indicators provide an extremely useful source of additional information. These indicators help identify momentum, trends, volatility and various other aspects in a security to aid in the technical analysis of trends. While some traders just use a single indicator for buy and sell signals, it is best to use them along with price movement, chart patterns and other indicators. A number of technical indicators are in use. 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. A moving average, as the name suggests, represents an average of a certain series of data that moves through time. The most common way to calculate the moving average is to work from the last 10 days of closing prices. Each day, the most recent close (day 11) is added to the total and the oldest close (day 1) is subtracted. The new total is then divided by the total number of days (10) and the resultant average computed. The purpose of the moving average is to track the progress of a price trend. The moving average is a smoothing device. By averaging the data, a smoother line is produced, making it much easier to view the underlying trend. A moving average filters out random noise and offers a smoother perspective of the price action. Moving Average Convergence Divergence (MACD): MACD is a momentum indicator and it is made up of two exponential moving averages. The MACD plots the difference between a 26-day exponential moving average and a 12-day exponential moving average. A 9-day moving average is generally used as a trigger line. When the MACD crosses this trigger and goes down it is a bearish signal and when it crosses it to go above it, it's a bullish signal. This indicator measures short-term momentum as compared to longer term momentum and signals the current direction of momentum. Traders use the MACD for indicating trend reversals. Relative Strength Index: The relative strength index (RSI) is another of the well-known momentum indicators. 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. RSI is plotted in a range of 0100. A reading above 70 suggests that a security is overbought, while a reading below 30 suggests that it is oversold. This indicator helps traders to identify whether a securitys price has been unreasonably pushed to its current levels and whether a reversal may be on the way. Stochastic Oscillator: The stochastic oscillator is one of the most recognized momentum indicators. 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, the higher is the buying pressure, and the closer the closing price is to the period's low, the more is the selling pressure. The idea behind this indicator is that in an uptrend, the price should be closing near the highs of the trading range, signaling upward momentum in the security. In downtrends, the price should be closing near the lows of the trading range, signaling downward momentum. The stochastic oscillator is plotted within a range of zero and 100 and signals overbought conditions above 80 and oversold conditions below 20.


Q.5 Compare Arbitrage pricing theory with the Capital asset pricing model.

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. Capital Asset Pricing Model (CAPM) calculates the required rate of return for any risky asset based on the securitys beta. Beta is a measure of the movement of the securitys return with the return on 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. 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. However, indexes are imperfect proxies for overall market as no single index includes all capital assets, including stocks, bonds, real estate, collectibles, etc. 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. An alternative pricing theory with fewer assumptions, the Arbitrage Pricing Theory (APT), has been developed by Stephen Ross. It can calculate expected return without taking recourse to the market portfolio. It is a multi-factor model for 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. APT calculates relations among expected returns that will rule out arbitrage by investors. The APT requires three assumptions: 1) Returns can be described by a factor model. 2) There are no arbitrage opportunities. 3) There are large numbers of securities that permit the formation of portfolios that diversify the firm-specific risk of individual stocks. The Capital Asset Pricing Model (CAPM) is a model to explain why capital assets are priced the way they are. William Sharpe, Treynor and Lintner contributed to the development of this model. 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. CAPM extended Harry Markowitzs portfolio theory to introduce the notions of systematic and unsystematic (or unique) risk. Arbitrage Pricing Theory vs. 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. The APT model is different from the CAPM in that it is far less restrictive in its assumptions. APT allows the individual investor to develop their model that explains the expected return for a particular asset. Intuitively, 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. As these factors move, so does the expected return on the stock - and therefore its value to the investor. However, the potentially large number of factors means that more factor sensitivities have to be calculated. There is also no guarantee that all the relevant factors have


been identified. This added complexity is the reason arbitrage pricing theory is far less widely used than CAPM. In the CAPM theory, the expected return on a stock can be described by the movement of that stock relative to the rest of the stock market. The CAPM theory is really just a simplified version of the APT, where the only factor considered is the risk of a particular stock relative to the rest of the stock market - as described by the stock's beta. From a practical standpoint, CAPM remains the dominant pricing model used today. When compared to the Arbitrage Pricing Theory, the Capital Asset Pricing Model is both elegant and relatively simple to calculate.
Q.6 Discuss the different forms of market efficiency.

Forms of Market Efficiency

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

Lastly, the strong form of EMH suggests that stock prices reflect all information, whether it be public (say in SEBI filings) or private (in the minds of the CEO and other insiders). So even with material non-public information, EMH asserts that stock prices cannot be predicted with any accuracy.