Presentation on Efficient Portfolio Construction

2. 
 Portfolio – Combination of more than 1 risky
Assets
 Provides Diversification
 “Is Portfolio investment always better than
Investing in a single asset?”
 Portfolio is better only if it’s properly designed
and managed

3. 

4. 
 Portfolio Construction
 Assets Selection
 Data Collection
 Return Series calculation
 The Variance- Covariance
Matrix
 Constructing the portfolio
 Return calculation
 Risk calculation
 Calculating  (Theta)

5. 
 Selected Sectors:
Bank
Miscellaneous
Engineering
Tannery
Pharmaceuticals
Food & Allied
 Selection Criteria:
 Market capitalization
 Listed before November
1, 2005
 ‘A’ category share
 Listed in Dhaka Stock
Exchange
 Relatively higher NAV &
lower P/E ratio of the
companies with
comparing market
average.

6. 
Bank
IBBL
CBL
Miscellaneous
Beximco Ltd
BSC
BD ThaiEngineering
Food and
Beverage
NTC
Square Pharma
Pharma-
ceuticals
Renata Pharma
Tannery Apex tannery
SIBL

7. 
 Price Data
 Month end closing price
 May 1 Nov to Dec 2010
 Dividend Information
 May 1 Nov to Dec 2010
 Cash dividend, Stock Dividend & Declaration Date
 T-Bill Rate
 6 month-Bill Rate
 May 1 Nov to Dec 2010

8. 
Monthly
closing
stock price
Adjustment of
dividend
Calculate
mean return
and average
Find RFR on
Govt. 6month
T-bills
Excess
return
calculation
Giving each
value equal
weight 0.1
Finding
Variance
covariance
matrix
Determining
standard
deviation
Sorting out
optimal portfolio
under different
conditions

9. 

10. 

11. 

12. 
November price
December price
Return
on
Decem
ber
2005
Formula for return

13. 
Mean
Return
of
Bexim
co Ltd

14. 

15. 

16. 
Portfolio
Formula for portfolio
excess return
portfolio excess return

17. 
Portfolio
Formula for Portfolio
variance

19. Objective in portfolio construction
Portfolio is the combination of various assets with different
risk and return
 Minimizing risk (standard deviation) by not allowing
short sell.
 Minimizing risk(standard deviation) by allowing
short sell.
 Minimizing risk (standard deviation) by not allowing
short sell for a given return.
 Minimizing risk (standard deviation) by allowing
short sell for a given return.
 Maximizing theta by not allowing short sell.
 Maximizing theta by allowing short sell.

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