introduction to portfolio mangement

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 –a group of securities held together.
Return- the multiplication of investment.
Risk –risk means any uncertainties which can evaporate/reduce the expected return.

3. FUNDAMENTAL ANALYSIS
• ECONOMICAL
• INDUSTRY
• COMPANY
TECHNICAL ANALYSIS

4. Periodic return:-
R =
𝐷+ 𝑃𝑡+1−𝑃𝑡
𝑃𝑡
× 100
where,
D cash dividend
𝑃𝑡+1selling price
𝑃𝑡purchase price
Deterministic return:-
R =
𝑅1+ 𝑅2+ 𝑅3
𝑛
where,
𝑅1, 𝑅2, 𝑅3different returns from security
n no. of returns

5. Forecasted return :-
𝑅 =
𝑖=1
𝑛
𝑃𝑖 𝑅𝑖
where,
𝑅expected return
𝑃𝑖probability of the different return
𝑅𝑖return on 𝑖 𝑡ℎ
probability
n no. of total possibility

6. 𝜎 =
𝑖=1
𝑛
𝑅𝑖 − 𝑅 2 𝑃𝑖
Coefficient of variation(C.V)
C.V =
𝜎
𝑅

7. 𝐸 𝑅 =𝑅𝑓 + β(𝐾 𝑚 − 𝑅𝑓)
where,
𝑅𝑓risk free return
𝐾 𝑚market return
β market-related risk
𝐸 𝑅 expected return
risk premium

8. β =
𝑐𝑜−𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒(𝑎,𝑚)
σ 𝑚
2 =
𝑟 𝑎,𝑚 σ 𝑎
σ 𝑚
where,
𝑐𝑜 − 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒(𝑎, 𝑚)co-variance of return on an individual company’s share(A) with return
for market as a whole(m),
𝑟 𝑎, 𝑚 coefficient of correlation b/w company share(A) & market rate of return,
σ 𝑎standard deviation on return from share A,
σ 𝑚 standard deviation on market rate of return.

9. 𝐸 𝑅 =
𝑖=1
𝑛
𝑊𝑖 𝐸(𝑅𝑖)
where,
𝐸 𝑅 expected return on the portfolio
𝐸(𝑅𝑖) expected return on the 𝑖 𝑡ℎ
security
𝑊𝑖weight of the 𝑖 𝑡ℎ
security
n no. of security in the portfolio
σ 𝑝= 𝑤1
2
σ1
2
+ 𝑤2
2
σ2
2
+ 2𝑤1 𝑤2σ1σ2 𝑟12