NMIMS - Capital Market and Portfolio Management

 

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Capital Market and Portfolio Management

 

1. Calculate the standard deviation and return of a portfolio consisting of 70% of investment in Alpha Ltd and 30% of investment in Gamma Ltd.

 

Probability	Alpha Ltd return (%)	Gamma Ltd return (%)
20%	12	16
30%	15	14
25%	10	10
15%	12	8
10%	5	6

 

Introduction:

Standard deviation is used to identify the risk quotient linked to or associated with particular security that forms part of the portfolio. Return of portfolio or portfolio return is explained as the profit or loss that might arise by making an investment in an investment portfolio which is a combination of multiple or different types of investments.

Concept and

 

2. Calculate the Beta of the stock if the following information is available:

 

Year	Stock Return	Market Return
1	24%	20%
2	30%	24%
3	15%	18%
4	20%	22%
5	25%	18%

Explain Beta and comment on the value of Beta as calculated above. From companies listed on BSE give 2 examples each of Beta>1 and Beta <1.  (10 Marks)

 

Introduction:

The beta coefficient is a concept used in fundamental analysis to access the volatility of a stock or an asset when compared to the overall market. As a general practice, the overall beta of the market is considered to be 1.0. An investor using beta calculations is trying to find out how much risk a stock is adding to a portfolio. Risks in the market are of two types:

a.     Systematic risk, also known as

 

 

3. Neha has joined as an Analyst in a company after completing her MBA and was asked by her manager to suggest which one is a better portfolio on the basis of the given data:

 

 

                                         TABLE BELOW

 

 

Observed Return		Beta
Portfolio Delta	20%		1.25
Portfolio Theta	17%		0.8

 

 

Risk-free rate is 6.5%, Return on the market portfolio is 15%, Standard Deviation of the market is 10%.

 

a. Suggest which portfolio has outperformed the market on the basis of Jensen index.  (5 Marks) 

 

Introduction

Jensen index was developed by American economist Michel Jensen in 1968, this model can be used to monitor the fund performance along with a risk-adjusted basis.

Concept and application:

Jensen index is an index that emulates the performance of investment managers by allowing for portfolio risk. It uses the capital asset pricing model (CAPM) to find out whether a money manager outperformed a market index. A high Jensen index indicates a high level of return given Dear students, get fully solved assignments by professionals

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