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Portfolio management
1.
2. PORTFOLIO MANAGEMENT
Portfolio Management is an art & science of creating and managing the portfolio in order to
minimize the risk or to maximize the return at a particular risk.
Portfolio โa group of securities held together.
Return- the multiplication of investment.
Risk โrisk means any uncertainties which can evaporate/reduce the expected return.
4. Periodic return:-
R =
๐ท+ ๐๐ก+1โ๐๐ก
๐๐ก
ร 100
where,
D๏ cash dividend
๐๐ก+1๏ selling price
๐๐ก๏ purchase price
Deterministic return:-
R =
๐ 1+ ๐ 2+ ๐ 3
๐
where,
๐ 1, ๐ 2, ๐ 3๏ different returns from security
n๏ no. of returns
5. Forecasted return :-
๐ =
๐=1
๐
๐๐ ๐ ๐
where,
๐ ๏ expected return
๐๐๏ probability of the different return
๐ ๐๏ return on ๐ ๐กโ
probability
n๏ no. of total possibility
8. ฮฒ =
๐๐โ๐ฃ๐๐๐๐๐๐๐(๐,๐)
ฯ ๐
2 =
๐ ๐,๐ ฯ ๐
ฯ ๐
where,
๐๐ โ ๐ฃ๐๐๐๐๐๐๐(๐, ๐)๏ co-variance of return on an individual companyโs share(A) with return
for market as a whole(m),
๐ ๐, ๐ ๏ coefficient of correlation b/w company share(A) & market rate of return,
ฯ ๐๏ standard deviation on return from share A,
ฯ ๐๏ standard deviation on market rate of return.
9. ๐ธ ๐ =
๐=1
๐
๐๐ ๐ธ(๐ ๐)
where,
๐ธ ๐ ๏ expected return on the portfolio
๐ธ(๐ ๐) ๏ expected return on the ๐ ๐กโ
security
๐๐๏ weight of the ๐ ๐กโ
security
n๏ no. of security in the portfolio
ฯ ๐= ๐ค1
2
ฯ1
2
+ ๐ค2
2
ฯ2
2
+ 2๐ค1 ๐ค2ฯ1ฯ2 ๐12