MBA FIN301- SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

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ASSIGNMENT

DRIVE	FALL 2018
PROGRAM	MBA
SEMESTER	3
SUBJECT CODE & NAME	MBA FIN301- SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
BK ID	B1754
CREDITS	4
MARKS	30

Note –The Assignment is divided into 2 sets. You have to answer all questions in both sets. Average score of both assignments scored by you will be considered as your IA score. Kindly note that answers for 10 marks questions should be approximately of 400 words.

SET I

Question.1. Explain the concept of Random Walk in the context of Efficient Market Hypothesis.

Answer:The notion that the price of stocks reflect all the publicly available information is referred to as the Efficient Market Hypothesis (“EMH”) or the Random Walk Theory. This notion was first developed by Eugene Fama in 1960. According to the theory, it is believed that the security markets are extremely efficient in reflecting all the available

Question.2. Elucidate the concept of Efficient Frontier.

Answer:The efficient frontier is the set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a given level of expected return. Portfolios that lie below the efficient frontier are sub-optimal because they do not provide enough return for the level of risk. Portfolios that cluster to the right of the efficient frontier are also sub-optimal because they have a higher level of risk for the defined rate of

Question.3. Discuss on the issues in Beta Estimation.

Answer: The concept of beta to measure systematic risk is a key aspect of Modern Portfolio Theory. Beta is used in the capital asset pricing model to determine the hurdle rate for securities. A high beta is often used as shorthand for a risky or growth stock, while a low beta is traditionally associated with "safer" stocks, such as utilities. Gold is typically not correlated to the market as a whole and hence has a beta around 0. Betas can range from across the spectrum; however, it is rare to see one below -1 or above 4. The market, as measured by the S&P 500, has a beta of 1 by definition.

SET II

Question.1.Discuss on International Diversification

Answer:In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets. If asset prices do not change in perfect synchrony, a diversified portfolio will have less variance than the weighted average variance of its constituent assets, and often less volatility than the least volatile

Question.2. a. Distinguish between Business risk and Financial Risk

Answer:Financial risk refers to a company's ability to manage its debt and financial leverage, while business risk refers to the company's ability to generate sufficient revenue to cover its operational expenses. An alternate way of viewing the difference is to see financial risk as the risk that a company may default on its debt payments, and business risk as the risk that the company will be unable to function as a profitable enterprise.

Financial Risk

b. Explain the stages in the Industry Life Cycle

Answer:Industry analysis is a tool that facilitates a company's understanding of its position relative to other companies that produce similar products or services. Understanding the forces at work in the overall industry is an important component of effective strategic planning. Industry analysis enables small business owners to identify the threats and opportunities facing their businesses, and to focus their resources on developing unique capabilities that could lead to a competitive advantage.

3. a) State the assumptions of Technical Analysis and elucidate any two of it.

Answer:Technical analysis is a method of evaluating securities that involves a statistical analysis of market activity, such as price and volume. Technical analysts do not attempt to measure a security’s intrinsic value, but rather, use charts and other tools to identify patterns that can be used as a basis for investment decisions.

There are many different forms of technical

b) Elucidate the tools used in Technical analysis

Answer:There are so many technical analysis tools out there and it is very easy to get overwhelmed. At least some of the tools are complex in their underlying math, but easy to use. When using technical analysis to control buying and selling bereft from fundamental analysis try to keep the time scale smaller. Holding on too long can open you up to something unexpected.

Simple Moving Average

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