Post on 04-Jun-2018
8/13/2019 Research Methodology of portfolio management
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Introduction and statement of the problem
This topic is substantially important in taking investment decision in the stock market.
Portfolio management will help one in identifying those securities which will help investor to
deploy his funds on those securities which will increase the return for given level of risk or
which will decrease the risk for given level of investment.
By using portfolio management tools like risk-return analysis, Markowitz model, sharp
model here we have to identify those securities which will maximize our return on funds
deployed.
Short Literature Survey
Portfolio management
Portfolio management is the professional management of varioussecurities (shares, bonds
and other securities) andassets (e.g.,real estate)in order to meet specified investment goals
for the benefit of the investors. Investors may be institutions (insurance companies, pension
funds, corporations, charities, educational establishments etc.) or private investors (both
directly via investment contracts and more commonly viacollective investment
schemes e.g.mutual funds orexchange-traded funds).
Each of the investment avenues has their own risk and return. Investor plans hisinvestment as per this riskreturn profile or his preferences while managing his portfolio
efficiently so as to secure the highest return for lowest possible risk. This in short is the
portfolio management.
Portfolio management is the process of encompassing many activities of investment
in assets and securities which includes planning, supervision, timing, rationalization, etc. inselection of securities to meet investors objectives.
Investment management is the another word which can be used for portfolio
management
http://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Mutual_fundshttp://en.wikipedia.org/wiki/Exchange-traded_fundhttp://en.wikipedia.org/wiki/Exchange-traded_fundhttp://en.wikipedia.org/wiki/Mutual_fundshttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Securities8/13/2019 Research Methodology of portfolio management
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Types of risks
1. Systematic risk: -
Systematic risk is non diversifiable& is associated with the securities market as well as the
economic, sociological, political, & legal considerations of prices of all securities in theeconomy. The affect of these factors is to put pressure on all securities in such a way that the
prices of all stocks will more in the same direction.
2. Unsystematic Risk: -
The importance of unsystematic risk arises out of the uncertainty surrounding of particular
firm or industry due to factors like labour strike, consumer preferences and management
policies. These uncertainties directly affect the financing and operating environment of the
firm. Unsystematic risks can owing to these considerations be said to complement thesystematic risk forces.
Risk Return relationship
The higher the risk taken, the higher is the return. But proper management of risk involves
the right choice of investments whose risks are compensating.
GOVT. Bond
Debentures /Bonds
Insurance companies/post office service
Fixed Deposits of companies
Mutual funds
Equity of blue chip companies
Risk
Equity of venture capital funds
Return
Risk free Return
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RESEARCH DESIGN
The research design of this project is descriptive research. Because, here we have to offer a
solution for the problem i.e. to construct an optimum portfolio. As we are here doing our
research based on secondary data which are already available and we are not needed to
collect those data, so we use descriptive research design.
RESEARCH METHODOLOGY
We have use secondary data for research on this topic. We have collected data for the
period of January 2012 to December 2012. These data are in the form of share prices of
different company and balancesheet of different companies. We have used those data in
the selection of the company for investment and calculating risk and return for the same
companies according to Markowitz and sharp model. The different secondary sources
have been use for collection of data for prices of share and financial performance of
various companies. Those are
www.bseindia.com
www.moneycontrol.com
www.in.com
Population:- The population in this project includes all companies in the capital goods and
sugar sector. Price of all these companies in the BSE is my population.
Sampling method:- The sampling method which We have used is non-probabilistic
Judgmental sampling. Because, all sectors for investment are selected by researchers
judgment in order to invest scarce funds. And to select the companies in this sector We have
use EPS (earning per share) as the performance criteria for these companies. And the
companies with the more EPS are selected for further analysis in portfolio.
Data analysis:-Analysis is an important part in the project. Statistical tools We have used
are mean, standard deviation, variance, co relation, regression, Beta coefficient and standard
error for various securities. We have used Markowitz model and sharp model in portfolio
management to decide the optimum portfolio.
http://www.bseindia.com/http://www.bseindia.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.in.com/http://www.in.com/http://www.in.com/http://www.moneycontrol.com/http://www.bseindia.com/8/13/2019 Research Methodology of portfolio management
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TIME & BUDGET
We have selected time period of January 2012 to December 2012 to collect data for our
research.
REASON FOR TAKING UP THE PROJECT
As we know there are many investment avenues where one can invest and one can get
maximum out of their scarce fund, and shares are one of the most attractive and risky
investment option that one can consider for investment.
So, here by analysing risk and return in 3 sectors namely IT, banking and pharmaceutical
sector. We are trying to find out risk and return in every sector and trying to find out which
sector will give us maximum return.
So, basically we are suggesting the investor best company to deploy their fund in the given
sectors so that they can maximize their return at minimum risk.
LIMITATION OF THE PROJECT:-
As We have collected prices of the share for the year 2012. So, prices of share for thedifferent period may be different. So, decision made out of this analysis cant be
applicable for other time period for investment.
We have selected only 3 sector namely, information technology, banking and pharmasector. So, there may be other sectors which are more profitable than these sectors. So in
reality one can select other sectors in order to maximize the return. So, practically it is not
possible to do investment in only certain sector. We have to take into consideration each
and every sector of economy for investment.
And due to our lake of experience in this field, it may be possible that analysis made byme may not be 100% correct and accurate.
FURTHER SCOPE OF STUDY:-
One can further study in this field by selecting different sectors for investment. And one can
evaluate securities using different portfolio tools for investment of scarce funds.
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