Security analysis & Portfolio Management

Inbuss Highlights

"My stint at Infinity has brought out various facets of my personality that were previously unknown to me. So, appears that I'm ripe for Citius, Altius, Fortius!!” - Suruchi Berry, Batch of 2007

Security analysis & Portfolio Management

Contact Hours : 30 hrs
Credit : 1 Credit
Prerequisite : Financial Management I, Financial Management II
Instructor : Dr  S.K Chaudhari

 

Course Objectives
The course is designed to provide a perspective on modern portfolio management of financial assets and derivatives. The students will learn basic tools and techniques of security analysis and portfolio management and their practical applications including applications based on Excel spread sheet and other available packages (e.g., EViews).

 

In particular, they will be exposed to technical analysis, stock and bond valuation (including simulation models), portfolio construction (based on no-linear programming techniques), and portfolio performance evaluation.

 

Pedagogy
The course will be delivered through lecture, exercises, and available empirical studies. About one-third of the sessions will be devoted to analysis of real life data in the computer lab, which will facilitate ‘learning by doing’.

 

The students will be required to undertake individual assignment and group project work (see page 3 & 4) in specific areas of equity research. The project works are intended to develop analytical skills for empirical research, and to have deeper understanding of the course contents.

 

Course Contents
See next page

 

Evaluation

Components

Weight (%)

Individual Assignment*

10

Group Project Work*

20

Mid-Term Examination

35

Term-End Examination

35

* No assignment will be accepted for evaluation beyond the scheduled date

 

Study Materials

The study materials will consist of select papers/exercises. In addition, the students may refer to the following text books:
1.    Fisher and Jordon, Security Analysis and Portfolio Management
2.    Zvi Bodie, Alex Kane and Alan J. Marcus, Investments
3.    E. J. Elton and M. J. Grubber, Modern Portfolio Theory and Investment Analysis
4.    Gordon J. Alexander and William F. Sharpe, Fundamentals of Investments

 

Course Contents

Sessions

1 - 8

  • Main themes of security analysis and portfolio management
  • Return-risk concepts and measurement*
  • Securities Market - organisation, operations and emerging trends
  • Stock market indices and derived series
  • Macro-economic determinants of share prices
  • Efficient market hypothesis - concepts, evidence and implication*
  • Biased Random Walk – concept, evidence and price path simulation
  • Technical analysis - basic tools and applications*

Sessions

9 - 11

  • Investment in equity shares – basic analysis including industry & company analysis
  • Share valuation models (including a simulation model)*
  • Valuation of share under inflation

Sessions

12 – 15

  • Debt instruments – pricing, yield measurement and yield curves*
  • Price-yield relationship - duration and convexity*
  • Bond portfolio management*

Sessions

16 – 19

  • Modern portfolio theory - Markowitz Model/CAPM/APT
  • Construction of optimal portfolios using optimization techniques*
  • Estimation of share beta*

Sessions

20 – 22

  • Mutual Funds
  • Portfolio performance measurement*

Sessions

23 & 24

  • Futures & options
  • Hedging portfolio risk with index futures

* Requires working in comp lab.


Individual Assignment (Weight: 10%)
You are required to prepare an analytical report on a corporate stock, which must contain, inter alia, the following components:
1.    Brief industry analysis as a backdrop to appreciate the company’s business performance
2.    Brief background of the company

  • Products/business portfolio
  • Market structure and competitive profile of the company (key factors)
  • Future prospects

3.    Financial performance analysis

  • Analysis of recent trends (3-year) in financial performance (develop an appropriate format for the purpose)
  • Projected financials for next 3-year period

4.    Valuation of the stock (use different approaches including simulation model)
5.    Technical analysis
6.    Investment arguments and recommendations
7.    Design a front page to present the executive summary of your report

Mention clearly the sources of all data and information. Also note that cut-paste from available reports will be penalized heavily. It might even lead to rejection of the report.

 

Group Project Work (Weight: 20%)

The group shall not exceed 5 members. The group is required to undertake an empirical study on a select topic based on primary/secondary data and information. The group will have to maintain the following time schedule:
a.    Selection of topic and submission of proposal on or before 31 July
b.    Submission of preliminary findings and draft report on or before 30 August
c.    Submission of final report by the end of the term (exact date will be announced)

 

The group may select a topic from the following list or any other topic:
1.    A critical review of the Indian securities market
2.    Market anomalies – evidence from the Indian market
3.    Empirical investigation into stock price volatility
4.    Casual relationship between FII trading and stock price movements
5.    Inflation and value of stock
6.    Term structure of government securities
7.    Does duration and convexity explain bond price sensitivity?
8.    Construction of optimal portfolio
9.    Performance evaluation of mutual funds

 
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