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1.1 INVESTMENT Investment is the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value. It is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance no matter for households, firms, or governments. An investment involves the choice by an individual or an organization such as a pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility of generating returns over a period of time. Investment comes with the risk of the loss of the principal sum. The investment that has not been thoroughly analyzed can be highly risky with respect to the investment owner because the possibility of losing money is not within the owner s control. The difference between speculation and investment can be subtle. It depends on the investment owner s mind whether the purpose is for lending the resource to someone else for economic purpose or not. In the case of investment, rather than store the good produced or its money e!uivalent, the investor chooses to use that good either to create a durable consumer or producer good, or to lend the original saved good to another in e"change for either interest or a share of the profits. In the first case, the individual creates durable consumer goods, hoping the services from the good will make his life better. In the second, the individual becomes an entrepreneur using the resource to produce goods and services for others in the hope of a profitable sale. The third case describes a lender, and the fourth describes an investor in a share of the business. In each case, the consumer obtains a durable asset or investment, and accounts for that asset by recording an e!uivalent liability. As time passes, and both prices and interest rates change, the value of the asset and liability also change. In finance, investment is the commitment of funds by buying securities or other monetary or paper (financial) assets in the money markets or capital markets, or in fairly li!uid real assets, such as gold or collectibles. #aluation is the method for assessing whether a potential investment is worth its price. $eturns on investments will follow the risk%return spectrum.

Types

of

financial

investments

include

shares,

other e!uity

investment,

and bonds (including bonds denominated in foreign currencies). These financial assets are then e"pected to provide income or positive future cash flows, and may increase or decrease in value giving the investor capital gains or losses. Trades in contingent claims or derivative securities do not necessarily have future positive e"pected cash flows, and so are not considered assets, or strictly speaking, securities or investments. &evertheless, since their cash flows are closely related to (or derived from) those of specific securities, they are often studied as or treated as investments. Investments are often made indirectly through intermediaries, such as banks, mutual funds, pension funds, insurance companies, collective investment schemes, and investment clubs. Though their legal and procedural details differ, an intermediary generally makes an investment using money from many individuals, each of whom receives a claim on the intermediary. 'ithin personal finance, money used to purchase shares, put in a collective investment scheme or used to buy any asset where there is an element of capital risk is deemed an investment. (aving within personal finance refers to money put aside, normally on a regular basis. This distinction is important, as investment risk can cause a capital loss when an investment is realized, unlike saving(s) where the more limited risk is cash devaluing due to inflation. In many instances the terms saving and investment are used interchangeably, which confuses this distinction. )or e"ample many deposit accounts are labeled as investment accounts by banks for marketing purposes. 'hether an asset is a saving(s) or an investment depends on where the money is invested* if it is cash then it is savings, if its value can fluctuate then it is investment.

1.2 MANAGEMENT +anagement in all business and human organization activity is the act of getting people together to accomplish desired goals and ob,ectives. +anagement comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort

for the purpose of accomplishing a goal. $esourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources. +anagement can also refer to the person or people who perform the act(s) of management 1.3 PORTFOLIO A collection of investments all owned by the same individual or organization. These investments often include stocks, which are investments in individual businesses- bonds, which are investments in debt that are designed to earn interestand mutual funds, which are essentially pools of money from many investors that are invested by professionals or according to indices. (o, it is a grouping of financial assets such as stocks, bonds and cash e!uivalents, as well as their mutual, e"change% traded and closed%fund counterparts. .ortfolios are held directly by investors and/or managed by financial professionals. Portfolio Investment .ool of different investments by which an investor bets to make a profit (or income) while aiming to preserve the invested (principal) amount. These investments are chosen generally on the basis of different risk%reward combinations* from low risk, low yield for growth. (gilt edged) to high risk, high yield (,unk bonds) ones- or different types of income streams* steady but fi"ed, or variable but with a potential

Portfolio Mana ement The art and science of making decisions about investment mi" and policy, matching investments to ob,ectives, asset allocation for individuals and institutions, and balancing risk against performance. .ortfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. e!uity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to ma"imize return at a given appetite for risk. In the case of mutual and e"change% traded funds (0T)s), there are two forms of portfolio management* passive and

active. .assive management simply tracks a market inde", commonly referred to as inde"ing or inde" investing. Active management involves a single manager, co% managers, or a team of managers who attempt to beat the market return by actively managing a fund s portfolio through investment decisions based on research and decisions on individual holdings. 1losed%end funds are generally actively managed. 1.! INVESTMENT PORTFOLIO MANAGEMENT AN" PORFOLIO T#EOR$ .ortfolio theory is an investment approach developed by 2niversity of 1hicago economist 3arry +. +arkowitz (4567 % ), who won a &obel .rize in economics in 4558. .ortfolio theory allows investors to estimate both the e"pected risks and returns, as measured statistically, for their investment portfolios. +arkowitz described how to combine assets into efficiently diversified portfolios. It was his position that a portfolio s risk could be reduced and the e"pected rate of return could be improved if investments having dissimilar price movements were combined. In other words, +arkowitz e"plained how to best assemble a diversified portfolio and proved that such a portfolio would likely do well. There are two types of .ortfolio (trategies*
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Passive Portfolio Strate %& A strategy that involves minimal e"pectation input, and instead relies on diversification to match the performance of some market inde". A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities. A'tive Portfolio Strate %& A strategy that uses available information and forecasting techni!ues to seek a better performance than a portfolio that is simply diversified broadly.

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+oreover, there are three more types of .ortfolios* 1. T(e Patient Portfolio& This type invests in well%known stocks. +ost pay dividends and are candidates to buy and hold for long periods. The vast ma,ority of the stocks in this portfolio represent classic growth companies,

those that can be e"pected to deliver higher earnings on a regular basis regardless of economic conditions. 2. T(e A ressive Portfolio& This portfolio invests in 9e"pensive stocks9 (in terms of such measurements as price%earnings ratios) that offer big rewards but also carry big risks. This portfolio 9collects9 stocks of rapidly growing companies of all sizes, that over the ne"t few years are e"pected to deliver rapid annual earnings growth. :ecause many of these stocks are on the less% established side, this portfolio is the likeliest to e"perience big turnovers over time, as winners and losers become apparent. 3. T(e )onservative Portfolio& They choose stocks with an eye on yield, as well as earnings growth and a steady dividend history. 1.* )LASSIFI)ATION OF INVESTOR 0very investor is different, with different financial goals, different tolerances to risk, different personal situations and different desires. )rom the point of view of investment management, these characteristics are often defined more rigorously as ob,ectives and constraints. ;b,ectives being the type of return being sought, while constraints include factors such as time horizon, how li!uid the investor is, any personal ta" situation and how risk is handled. &evertheless, it s really a balancing act between risk and return, with each investor having uni!ue re!uirements, as well as a uni!ue financial outlook. 'hat must remain constant throughout, however, is the delivery of an investment program that is not only specific to an investor s personal needs but that also works well and provides financial security for the future. 'ithin these constraints too, there should also be the opportunity to have some fun with investments if clients should so wish. )or e"ample, by, say, using a small proportion of available funds for dealing in more speculative investments such as technology companies or emerging market stocks. The si" investor types are* )a+tio+s % very conservative, this investor has a need for financial security and will avoid high%risk ventures as well as listening to professional advice, preferring to conduct their own financial affairs. They don t like to lose even

small amounts of money and never rush into investments, always giving financial opportunities a great deal of thought. Emotional % easily attracted to fashionable investments or hot tips, these investors act with their heart and not their head. A whim or a gut feeling leads their decisions, and they have great difficulty disengaging from poor investments or cutting losses. They have an unreasonable belief that things will come right in the end and often put their trust in luck or providence to safeguard their financial assets. Te'(ni'al % hard facts % numbers % lead this type of investor to active trading based on price movements. They are screen%watchers, sometimes obsessional, but their diligence can be rewarded if they spot trends. They may also have a tendency to need and buy the latest technology as they are always looking for some edge. ,+s% % these investors need to be involved with the markets, it gives them abuzz when they check the latest price movements, which may be several times a day. They have to keep buying and selling % on rumors, on overheard gossip, from the mass of newspapers and magazines they collect. Any tidbit of information they can glean is imbued with significance and a cause to take financial action. )as+al % a laid%back attitude to investment, these individuals are often hardworking and involved with work or family. They tend to believe that once an investment is made it will take care of itself, and that a good ,ob or a profession is the way to make real money. They easily forget that they own investment assets and rarely check on their financial affairs. And, though they may leave the running of their investments to professional advisors, they haven t been in contact with them for years. Informe- % uses information from a variety of sources and keeps an ongoing watch on their investments, the markets and the economy. They listen carefully to financial opinions and e"pert assessments, and will only go against market fashion, as a contrarian, after weighing up all the pros and cons. They are financially confident and have faith in their decisions, knowing that knowledge and e"perience will always win out to give them long%term profits.

1.. FA)TORS AFFE)TING INVESTMENT "E)ISIONS Past mar/et tren-s (ometimes history repeats itself- sometimes markets learn from their mistakes. Investors need to understand how various asset classes have performed in the past before planning finances. Ris/ a00etite The ability to tolerate risk differs from person to person. It depends on factors such as investors financial responsibilities, environment, basic personality, etc. Therefore, understanding investors capacity to take on risk becomes a crucial factor in investment decision making. Investment (ori1on 3ow long can investor keep the money invested< The longer the time%horizon, the greater are the returns that investor should e"pect. )urther, the risk element reduces with time. Investi2le s+r0l+s 3ow much money is investor able to keep aside for investments< The investible surplus plays a vital role in selecting from various asset classes as the minimum investment amounts differ and so do the risks and returns. Investment nee- 3ow much money do investor need at the time of maturity< This helps investor determine the amount of money he need to invest every month or year to reach the magic figure. E30e'te- ret+rns The e"pected rate of returns is a crucial factor as it will guide investors choice of investment. :ased on his e"pectations, he can decide whether he want to invest heavily into e!uities or debt or balance his portfolio. 1.7 RIS4 The !uantifiable likelihood of loss or less%than%e"pected returns. 0"amples* currency
risk, inflation risk, principal risk, country risk, economic risk, mortgage risk, li!uidity risk, market risk, opportunity risk, income risk, interest rate risk, prepayment risk, credit risk, unsystematic risk, call risk, business risk, counterparty risk, purchasing%

power risk, event risk.

'ith giving a too narrow definition of risk it can for most investors be perceived in three ways* = To generate negative returns = 2nderperforming a benchmark such as an inde" or a competing portfolio

= )ailing to meet one>s goals. 0ven though the average investor describes risk as something bad will happen there are almost no variables taking this fact into consideration. +arkowitz risk measure and beta for e"ample does not necessarily have to be negative as long as the market is in a positive trend. 1.5.1 T$PES OF RIS4 6a7 S$STEMATI) RIS4 Mar/et Ris/ )inding stock prices falling from time to time while a company>s earnings are rising, and vice versa, is not uncommon. The price of a stock may fluctuate widely within a short span of time even though earnings remain unchanged. The causes of this phenomenon are varied, but it is mainly due to a change in investors> attitudes toward e!uities in general, or toward certain types or groups of securities in particular. #ariability in return on most common stocks that are due to basic sweeping changes in investor e"pectations is referred to as market risk. +arket risk is caused by investor reaction to tangible as well as intangible events. 0"pectations of lower corporate profits in general may cause the larger body of common to fall in price. Investors are e"pressing their ,udgment that too much is being paid for earnings in the light of anticipated events. The basis for the reaction is a set of real, tangible events political, social, or economic. Intangible events are related to market psychology. +arket risk is usually touched off by a reaction to real events, but the emotional instability of investors acting collectively leads to a snow balling over reaction. The initial decline in the market can cause the fear of loss to grip investors, and a kind of her instinct builds as all investors make for the e"it. These reactions to reactions fre!uently culminate in e"cessive selling>s, pushing prices down far out of live with fundamental value. 'ith a trigger mechanism such as the assassination of a politician, the threat of war, or an oil shortage, virtually all stocks are adversely affected. ?ikewise, stocks in a particular industry group can be hard hit when the industry goes @out of fashion.A Two other factors, interest rates and inflation, are an integral part of the real forces behind market risk and are part of the larger category of systematic or

uncontrollable influences. ?et us turn our attention to interest rates. This risk factor has its most direct effect on bond investments. Interest8Rate Ris/ Interest%rate risk refers to the uncertainty of future market values and of the size of future income, caused by fluctuations in the general level of interest rates. The root cause of interest%rate risk lies in the fact that, as the rate of interest paid on 2.(. government securities (2(Bs) rises or falls, the rates of return demanded on alternative investment vehicles such as stocks and bonds issued in the private sector, rise or fall. In other words, as the cost of money changes for nearly risk%free securities (2(Bs), the cost of money to more risk%prone issuers (.rivate sector) will also change. In addition to the direct, systematic effect on bonds, there are indirect effects on common stocks. )irst, lower or higher interest rates make the purchase of stocks on margin (using borrowed funds) more or less attractive. 3igher interest rates, for e"ample, may lead to lower prices because of a diminished demand for e!uities by speculators who use margin. 0bullient stock markets are at times propelled to some e"cesses by margin buying when interest rates are relatively low. (econd, many firms such as public utilities finance their operations !uite heavily with borrowed funds. ;thers, such as financial institutions, are principally in the business of lending money. As interest rates advance, firms with heavy doses of borrowed capital find that more of their income goes toward paying interest on borrowed money. This may lead to lower earnings, dividends, and share prices. Advancing interest rates can bring higher earnings to lending institutions whose principal revenue sources is interest received on loans. )or these firms, higher earnings could lead to increased dividends and stock prices. P+r'(asin 8Po9er Ris/ +arket risk and interest%rate risk can be defined in terms of uncertainties as to the amount of current dollars to be received by an investor. .urchasing%power risk is the uncertainty of the purchasing power of the amounts to be received. In more everyday terms, purchasing%power risk refers to the impact of inflation or deflation on an investment. If we think of investment as the postponement of consumption, we can

10

see that when a person purchases a stock, he has foregone the opportunity to buy some good or service for as long as he owns the stock. If, during the holding period, good or services rise, the investor actually loses purchasing power. $ising prices on goods and services are normally associated with what is referred to as inflation. )alling prices on goods and services are termed deflation. :oth inflation and deflation are covered in the all%encompassing term purchasing power risk. Benerally, purchasing%power risk has come to be identified with inflation (rising prices)- the incidence of declining prices in most countries has been slight. +arket, purchasing%power and interest%rate risk are the principle sources of systematic risk in securities- but we should also consider another important category of security risk a unsystematic risks. 627 :ns%stemati' Ris/ 2nsystematic risk is the portion of total risk that is uni!ue or peculiar to a firm or an industry, above and beyond that affecting securities markets in general. )actors such as management capability, consumer preferences, and labor strikes can cause unsystematic variability of returns for a company>s stock. :ecause these factors affect one industry and/or one firm, they must be e"amined separately for each company. The uncertainty surroundings the ability of the issuer to make payments on securities stems from two sources* (4) the operating environment of the business, and (6) the financing of the firm. These risks are referred to as business risk and financial risk, respectively. They are strictly a function of the operating conditions of the firm and the way in which it chooses to finance its operations. ;ur intention here will be directed to the broad aspects and implications of business and financial risk. In%depth treatment will be the principal goal of later chapters on analysis of the economy, the industry, and the firm. ,+siness Ris/ :usiness risk is a function of the operating conditions faced by a firm and the variability these conditions in,ect into operating income and e"pected to increase 48 percent per year over the foreseeable future, business risk would be higher if operating earnings could grow as much as 4C percent or as little as D percent than if the range were from a high of 44 percent to a low of 5 percent. The degree of variation from the e"pected trend would measure business risk. :usiness risk can be

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divided into two broad categories* e"ternal and internal. Internal business risk is largely associated with the efficiency with which a firm conducts its operations within the broader operating environment imposed upon it. 0ach firm has its own set of internal risks, and the degree to which it is successful in coping with them is reflected in operating efficiently. To large e"tent, e"ternal business risk is the result of operating conditions imposes upon the firm by circumstances beyond its control. 0ach firm also faces its own set of e"ternal risks, depending upon the specific operating environmental factors with which it must deal. The e"ternal factors, from cost of money to defense%budget cuts to higher tariffs to a down swing in the business cycle, are far too numerous to list in detail, but the most pervasive e"ternal risk factor is probably the business cycle. The sales of some industries (steel, autos) tend to move in tandem with the business cycle, while the sales of others move country cyclically (housing). Eemographic considerations can also influence revenues through changes in the birth rate or the geographical distribution of the population by age, group, race, and so on. .olitical .olicies are a part of e"ternal business risk- government policies with regard to monetary and fiscal matters can affect revenues through the effect on the cost and availability of funds. If money is more e"pensive, consumers who buy on credit may postpone purchases, and municipal governments may not sell bonds to finance a water%treatment plant. The impact upon retail stores, television manufacturers, of water%purification systems is clear. Finan'ial Ris/ )inancial risk is associated with the way in which a company finances its activities. 'e usually gauge financial risk by looking at the capital structure of a firm. The presence of borrowed money of debt in the capital structure creates fi"ed payment in the form of interest that must be sustained by the firm. The presence of these interest commitments fi"ed interest payments due to debt of fi"ed%dividend payments on preferred stock causes the amount of residual earnings available for common stock dividends to be more variable than if no interest payments were re!uired. )inancial risk is avoidable risk to the e"tent that managements have the freedom to decide to borrow or not to borrow funds. A firm with no debt financing has no financial risk. :y engaging in debt financing, the firm changes the characteristic of the earnings stream available to the common%stock holders.

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(pecifically, the reliance on debt financing, called financial leverage, has at three important effects on common%stock holders. Eebt financing (4) increases the variability of their returns, (6) affects their e"pectations concerning their returns, and (F) increases their risk of being ruined. 1.5.2 RIS4 AVERSION $isk aversion is the reluctance of a person to accept a bargain with an uncertain payoff rather than another bargain with more certain, but possibly lower, e"pected payoff. )or e"ample, a risk%averse investor might choose to put his or her money into a bank account with a low but guaranteed interest rate, rather than into a stock that may have high returns, but also has a chance of becoming worthless. Investments in stocks include some sort of risk and since investors according to theory are risk averse, meaning they are reluctant to accept risk unless there is an e"pected gain from the risk itself. 3ere the risk premium of a stock plays an important role. If the risk premium would be zero, then no one would buy risky assets, there% fore the risk premium must always be positive. This is the only means to attract investors to risky assets. An investment with no risk premium could only be e"pected to yield the risk%free rate, which in standard finance theories means a government Treasury bill with the same maturity rate as the investor>s holding period. The premium itself is made up of a combination of the risk of the portfolio and the degree of risk aversion. $isk aversion myopia refers to the overemphasis on the possibility of short%term losses. 3uman beings are by nature more aware of risks in the near term future than in the long run, this however does not harmonize very well with how a rational investor should be%have. A short%term loss is often more painful than the possibility of the more important large long%term gains, markets are volatile and bumps in the road tend to be smoothed out as time goes by. (tudies made in the market suggests that the average investment horizon is about one year, hence risk%aversion myopia. 1.;. T<O ANAL$TI)AL MO"ELS 'hen the ob,ective of the analysis is to determine what stock to buy and at what price, there are two basic methodologies

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)undamental analysis maintains that markets may misprice a security in the short run but that the 9correct9 price will eventually be reached. .rofits can be made by trading the mispriced security and then waiting for the market to recognize its 9mistake9 and reprice the security.

Technical analysis maintains that all information is reflected already in the stock price. Trends are your friend and sentiment changes predate and predict trend changes. Investors emotional responses to price movements lead to recognizable price chart patterns. Technical analysis does not care what the value of a stock is. Their price predictions are only e"trapolations from historical price patterns.

Investors can use any or all of these different but somewhat complementary methods for stock picking. )or e"ample many fundamental investors use technicals for deciding entry and e"it points. +any technical investors use fundamentals to limit their universe of possible stock to good companies. The choice of stock analysis is determined by the investor s belief in the different paradigms for 9how the stock market works9 1.;.1 F:N"AMENTAL ANAL$SIS )undamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. 'hen applied to futures and fore", it focuses on the overall state of the economy, interest rates, production, earnings, and management. 'hen analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use- bottom up analysis and top down analysis. The term is used to distinguish such analysis from other types of investment analysis, such as !uantitative analysis and technical analysis. )undamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are several possible ob,ectives*

to conduct a company stock valuation and predict its probable price evolution, to make a pro,ection on its business performance, to evaluate its management and make internal business decisions,

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to calculate its credit risk.

)undamental analysis includes* 0conomic analysis Industry analysis 1ompany analysis

;n the basis of this three analysis the intrinsic value of the shares are determined. This is considered as the true value of the share. If the intrinsic value is higher than the market price it is recommended to buy the share. If it is e!ual to market price hold the share and if it is less than the market price sell the shares. 1.;.1.1 :SE ,$ "IFFERENT PORTFOLIO ST$LES Investors may use fundamental analysis within different portfolio management styles.

,+% an- (ol- investors believe that latching onto good businesses allows the investor s asset to grow with the business. )undamental analysis lets them find good companies, so they lower their risk and probability of wipe%out.

+anagers may use fundamental analysis to correctly value good and bad companies. 0ven bad companies stock goes up and down, creating opportunities for profits.

+anagers may also consider the economic cycle in determining whether conditions are right to buy fundamentally suitable companies. )ontrarian investors distinguish 9in the short run, the market is a voting machine, not a weighing machine9. )undamental analysis allows you to make your own decision on value, and ignore the market.

Val+e investors restrict their attention to under%valued companies, believing that it s hard to fall out of a ditch . The value comes from fundamental analysis.

+anagers may use fundamental analysis to determine future growth rates for buying high priced growth stocks. +anagers may also include fundamental factors along with technical factors into computer models (!uantitative analysis).

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To0 "o9n An- ,ottom :0& Investors can use either a top%down or bottom%up approach. The top%down investor starts his analysis with global economics, including both international and national economic indicators, such as BE. growth rates, inflation, interest rates, e"change rates, productivity, and energy prices. 3e narrows his search down to regional/industry analysis of total sales, price levels, the effects of competing products, foreign competition, and entry or e"it from the industry. ;nly then he narrows his search to the best business in that area. The bottom%up investor starts with specific businesses, regardless of their industry/region. 1.;.1.2 PRO)E":RES The analysis of a business health starts with financial statement analysis that includes ratios. It looks at dividends paid, operating cash flow, new e!uity issues and capital financing. The earnings estimates and growth rate pro,ections published widely by Thomson $euters and others can be considered either fundamental (they are facts) or technical (they are investor sentiment) based on your perception of their validity. The determined growth rates (of income and cash) and risk levels (to determine the discount rate) are used in various valuation models. The foremost is the discounted cash flow model, which calculates the present value of the future

dividends received by the investor, along with the eventual sale price. (Bordon model) earnings of the company, or cash flows of the company.

The amount of debt is also a ma,or consideration in determining a company s health. It can be !uickly assessed using the debt to e!uity ratio and the current ratio (current assets/current liabilities). The simple model commonly used is the .rice/0arnings ratio. Implicit in this model of a perpetual annuity (Time value of money) is that the flip of the ./0 is the

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discount rate appropriate to the risk of the business. The multiple accepted is ad,usted for e"pected growth (that is not built into the model). Browth estimates are incorporated into the .0B ratio but the math does not hold up to analysis. Its validity depends on the length of time you think the growth will continue. 1omputer modeling of stock prices has now replaced much of the sub,ective interpretation of fundamental data (along with technical data) in the industry. (ince about year 6888, with the power of computers to crunch vast !uantities of data, a new career has been invented. At some funds (called Guant )unds) the manager s decisions have been replaced by proprietary mathematical models. ,enefits& )undamental analysis helps in* Identifying the intrinsic value of a security. Identifying long%term investment opportunities, since it involves real%time data. "ra92a'/s& The drawbacks of fundamental analysis are* Too many economic indicators and e"tensive macroeconomic data can confuse novice investors. The same set of information on macroeconomic indicators can have varied effects on the same currencies at different times. It is beneficial only for long%term investments.

1.;.2 TE)#NI)AL ANAL$SIS Technical analysis is a security analysis discipline for forecasting the future direction of prices through the study of past market data, primarily price and volume. Technical analysts seek to identify price patterns and trends in financial markets and attempt to e"ploit those patterns. 'hile technicians use various methods and tools, the study of price charts is primary. Technicians especially search for archetypal patterns, such as the well%known head
and shoulders or double top reversal

patterns,

study indicators such as moving averages, and look for forms such as lines of support, resistance, channels, and more obscure formations such as flags, pennants or balance

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days. Technical analysts also e"tensively use indicators, which are typically mathematical transformations of price or volume. These indicators are used to help determine whether an asset is trending, and if it is, its price direction. Technicians also look for relationships between price, volume and, in the case of futures, open interest. 0"amples include the relative strength inde", and +A1E. ;ther avenues of study include correlations between changes in options (implied volatility) and put/call ratios with price. ;ther technicians include sentiment indicators, such as .ut/1all ratios and Implied #olatility in their analysis. Technicians seek to forecast price movements such that large gains from successful trades e"ceed more numerous but smaller losing trades, producing positive returns in the long run through proper risk control and money management. There are several schools of technical analysis. Adherents of different schools (for e"ample, candlestick charting, Eow Theory, and 0lliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one school. (ome technical analysts use sub,ective ,udgment to decide which pattern a particular instrument reflects at a given time, and what the interpretation of that pattern should be. (ome technical analysts also employ a strictly mechanical or systematic approach to pattern identification and interpretation. Technical analysis is fre!uently contrasted with fundamental analysis, the study of economic factors that influence prices in financial markets. Technical analysis holds that prices already reflect all such influences before investors are aware of them, hence the study of price action alone. (ome traders use technical or fundamental analysis e"clusively, while others use both types to make trading decisions. 2sers of technical analysis are most often called technicians or market technicians. (ome prefer the term technical market analyst or simply market analyst. An older term, chartist, is sometimes used, but as the discipline has e"panded and modernized the use of the term chartist has become less popular 1.;.2.1 )#ARA)TERISTI)S

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Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength inde", moving averages, regressions, inter% market and intra%market price correlations, cycles or, classically, through recognition of chart patterns. Technical analysis stands in contrast to the fundamental analysis approach to security and stock analysis. Technical analysis 9ignores9 the actual nature of the company, market, currency or commodity and is based solely on 9the charts,9 that is to say price and volume information, whereas fundamental analysis does look at the actual facts of the company, market, currency or commodity. )or e"ample, any large brokerage, trading group, or financial institution will typically have both a technical analysis and fundamental analysis team. Technical analysis is widely used among traders and financial professionals, and is very often used by active day traders, market makers, and pit traders. In the 45D8s and 4578s it was widely dismissed by academics. In a recent review, Irwin and .ark reported that HD of 5H modern studies found it produces positive results, but noted that many of the positive results were rendered dubious by issues such as data
snooping so that the evidence in support of technical analysis was inconclusive- it is still

considered by many academics to be pseudoscience. Academics such as 0ugene

)ama say the evidence for technical analysis is sparse and is inconsistent with the weak form of the efficient market hypothesis . 2sers hold that even if technical analysis cannot

predict the future, it helps to identify trading opportunities. In the foreign e"change markets, its use may be more widespread than fundamental
analysis. 'hile some isolated studies have indicated that technical trading rules might

lead to consistent returns in the period prior to 45I7, most academic work has focused on the nature of the anomalous position of the foreign e"change market. It is speculated that this anomaly is due to central bank intervention. $ecent research suggests that combining various trading signals into a 1ombined (ignal Approach may be able to increase profitability and reduce dependence on any single rule. 1.;.2.2 PRIN)IPLES

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Technicians say that a market s price reflects all relevant information, so their analysis looks at the history of a security s trading pattern rather than e"ternal drivers such as economic, fundamental and news events. .rice action also tends to repeat itself because investors collectively tend toward patterned behavior J hence technicians focus on identifiable trends and conditions. +arket action discounts everything based on the premise that all relevant information is already reflected by prices, pure technical analysts believe it is redundant to do fundamental analysis J they say news and news events do not significantly influence price, and cite supporting research such as the study by 1utler, .oterba, and (ummers titled 9'hat +oves (tock .rices<9 ;n most of the sizable return days Klarge market movesL...the information that the press cites as the cause of the market move is not particularly important. .ress reports on ad,acent days also fail to reveal any convincing accounts of why future profits or discount rates might have changed. ;ur inability to identify the fundamental shocks that accounted for these significant market moves is difficult to reconcile with the view that such shocks account for most of the variation in stock returns. Pri'es Move In Tren-s& Technical analysts believe that prices trend directionally. Analysts say that markets trend up, down, or sideways (flat). This basic definition of price trends is the one put forward by Eow Theory. An e"ample of a security that had an apparent trend is A;? from &ovember 6884 through August 6886. A technical analyst or trend follower recognizing this trend would look for opportunities to sell this security. A;? consistently moves downward in price. 0ach time the stock rose, sellers would enter the market and sell the stockhence the 9zig%zag9 movement in the price. The series of 9lower highs9 and 9lower lows9 is a tell tale sign of a stock in a down trend. In other words, each time the stock moved lower, it fell below its previous relative low price. 0ach time the stock moved higher, it could not reach the level of its previous relative high price. &ote that the se!uence of lower lows and lower highs did not begin until August. Then A;? makes a low price that doesn t pierce the relative low set earlier in the month. ?ater in the same month, the stock makes a relative high e!ual to the most recent

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relative high. In this a technician sees strong indications that the down trend is at least pausing and possibly ending, and would likely stop actively selling the stock at that point. #istor% Ten-s To Re0eat Itself& Technical analysts believe that investors collectively repeat the behavior of the investors that preceded them. 90veryone wants in on the ne"t +icrosoft,9 9If this stock ever gets to MH8 again, I will buy it,9 9This company s technology will revolutionize its industry, therefore this stock will skyrocket9 J these are all e"amples of investor sentiment repeating itself. To a technician, the emotions in the market may be irrational, but they e"ist. :ecause investor behavior repeats itself so often, technicians believe that recognizable (and predictable) price patterns will develop on a chart. Technical analysis is not limited to charting, but it always considers price trends. )or e"ample, many technicians monitor surveys of investor sentiment. These surveys gauge the attitude of market participants, specifically whether they are bearish or bullish. Technicians use these surveys to help determine whether a trend will continue or if a reversal could develop- they are most likely to anticipate a change when the surveys report e"treme investor sentiment. (urveys that show overwhelming bullishness, for e"ample, are evidence that an uptrend may reverse J the premise being that if most investors are bullish they have already bought the market (anticipating higher prices). And because most investors are bullish and invested, one assumes that few buyers remain. This leaves more potential sellers than buyers, despite the bullish sentiment. This suggests that prices will trend down, and is an e"ample of contrarian trading. 1.= MAR4O<IT> MO"EL 3arry +. +arkowitz is credited with introducing new concepts of risk measurement and their application to the selection of portfolios. 3e started with the idea of risk aversion> of average investors and their desire to ma"imize the e"pected return with the least risk. +arkowitz model is thus a theoretical framework for analysis of risk and return and their inter%relationships. 3e used the statistical analysis for measurement of risk and mathematical programming for selection of assets in a portfolio in an efficient manner. 3is framework led to the .concept of efficient portfolios. An efficient portfolio is e"pected to yield the highest return for a given level of risk or lowest risk for a given

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level of return. +arkowitz generated a number of portfolios within a given amount of money or wealth and given preferences of investors for risk and return. Individuals vary widely in their risk tolerance and asset preferences. Their means, e"penditures and investment re!uirements vary from individual to individual. Biven the preferences, the portfolio selection is not a simple choice of anyone security or securities, but a right combination of securities. +arkowitz emphasized that !uality of a portfolio will be different from the !uality of individual assets within it. Thus, the combined risk of two assets taken separately is not the same risk of two assets together. Thus, two securities of TI(1; do not have the same risk as one security of TI(1; and one of $eliance. $isk and $eward are two aspects of investment considered by investors. The e"pected return may vary depending on the assumptions. $isk inde" is measured by the variance or the distribution around the mean, its range etc., which are in statistical terms called variance and covariance. The !ualification of risk and the need for optimization of return with lowest risk are the contributions of +arkowitz. This led to what is called the +odern .ortfolio Theory, which emphasizes the tradeoff between risk and return. If the investor wants a higher return, he has to take higher risk. :ut he prefers a high return but a low risk and hence the need for a trade off. A portfolio of assets involves the selection of securities. A combination of assets or securities is called a portfolio. 0ach individual investor puts his wealth in a combination of assets depending on his wealth, income and his preferences. The traditional theory of portfolio postulates that selection of assets should be based on lowest risk, as measured by its standard deviation from the mean of e"pected returns. The greater the variability of returns, the greater is the risk. Thus, the investor chooses assets with the lowest variability of returns. Taking the return as the appreciation in the share price, if T0?1; shares.>) price varies from $s. FFI to $s. HI8 (with variability of 76N) and 1olgate from $s. 64I to $s. F4H (with a variability of CCN) during a time period, the investor chooses the 1olgate as a less risky share. As against this Traditional Theory that standard deviation measures the variability of return and risk is indicated by the variability, and that the choice depends on the securities with lower variability, the modem .ortfolio Theory emphasizes the need for ma"imization of returns through a combination of securities, whose total variability is lower. The risk of each security is different from that of others and by a proper combination of securities, called diversification- one can arrive at a combination wherein the risk of one is offset

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partly or fully by that of the other. In other words, the variability of each security and covariance for their returns reflected through their inter%relationships should be taken into account. Thus, as per the +odem .ortfolio Theory, e"pected returns, the variance of these returns and covariance of the returns of the securities within the portfolio arc to be considered for the choice of a portfolio. A portfolio is said to be efficient, if it is e"pected to yield the highest return possible for the lowest risk or a given level of risk. A set of efficient portfolios can be generated by using the above process of combining various securities whose combined risk is lowest for a given level of return for the same amount of investment, that the investor is capable of. The theory of +arkowitz, as stated above is based on a number of assumptions Ass+m0tions of Mar/o9it1 T(eor%& The +odern .ortfolio Theory of +arkowitz is based on the following assumptions* 4. Investors are rational and behave in a manner as to ma"imize their utility with a given level of income or money. 6. Investors have free access to fair and correct information on the returns and risk. F. The markets are efficient and absorb the information !uickly and perfectly. C. Investors are risk averse and try to minimize the risk and ma"imize return. H. Investors base decisions on e"pected returns and variance or standard deviation of these returns from the mean. D. Investors prefer higher returns to lower returns for a given level of risk. A portfolio of assets under the above assumptions for a given level of risk. ;ther assets or portfolio of assets offers a higher e"pected return with the same or lower risk or lower risk with the same or higher e"pected return. Eiversification of securities is one method by which the above ob,ectives can be secured. The unsystematic and company related risk can be secured. The unsystematic and company related risk can be reduced by diversification into various securities and assets whose variability is different and offsetting or put in different words which Fre negatively correlated or not correlated at all.

1.=.1 MAR4O<IT> "IVERSIFI)ATION

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+arkowitz postulated that diversification should not only aim at reducing the risk of a security by reducing its variability or standard deviation, but by reducing the covariance or interactive risk of two or more securities in a portfolio. As by combination of different securities, it is theoretically possible to have a range of risk varying from zero to infinity. +arkowitz theory of portfolio diversification attaches importance to standard deviation, to reduce it to zero, if possible, covariance to have as much as possible negative interactive effect among the securities within the portfolio and coefficient of correlation to have % 4 (negative) so that the overall risk of the portfolio as a whole is nil or negligible. Then the securities have to be combined in a mFnner that standard deviation is zero. S.". The coefficient of variation, namely O(.E./ +ean % is the lowest. The standard deviation of the portfolio determines the deviation of the returns and correlation coefficient of the proportion of securities in the portfolio, invested. The e!uation is* Pp6 O portfolio variance Pp O (tandard deviation of portfolio Qi O .roportion of portfolio invested in security i Q, O .roportion of portfolio invested in security , $i, O coefficient of correlation between i and , Pi O standard deviation of i P, O standard deviation of , & O number of securities Parameters of Mar/o9it1 "iversifi'ation :ased on his research, +arkowitz has set out guidelines for diversification on the basis of the attitude of investors towards risk and return and on a proper !uantification of risk. The investments have different types of risk characteristics, some caused systematic and market related risks and the other called unsystematic or company related risks. +arkowitz diversification involves a proper number of securities, not too few or not too many which have no correlation or negative correlation. The proper choice of companies, securities, or assets whose return is not correlated and whose risks are mutually offsetting to reduce the overall risk.

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)or building up the efficient set of portfolio, as laid down by +arkowitz.., we need to look into these important parameters* 4. 0"pected return. 6. #ariability of returns as measured by standard deviation from the mean. F. 1ovariance or variance of one asset return to other asset returns. In general the higher the e"pected return, the lower is the standard deviation or variance and lower is the correlation the better will be the security for investor choice. 'hatever is the risk of the individual securities in isolation, the total risk of the portfolio of all securities may be lower, if the covariance of their returns is negative or negligible. 1.=.2 )RITERIA OF "OMINAN)E Eominance refers to the superiority of one portfolio ;ver the other. A (et can dominate over the other, if with the same return, the risk is lower or with the same risk, the return is higher. Eominance principle involves the tradeoff between risk and return. )or two security portfolio, minimize the portfolio risk by the e!uation ;p O 'a ;a6R '2 ;b6R6 ('a 'b ;a ;ab) 0 ($p) O 'a 0 ($a) R 'b 0 ($b) $ refers to returns and 0 ($p) is the e"pected returns. ;p is the standard deviation, ' refers to the proportion invested in each security ;a ;b are the standard deviation of a and b securities and ;ab is the covariance or interrelations of the security returns. The above concepts arc used in the calculation of e"pected returns, mean standard deviation as a measure of risk and covariance as a measure of inter%relations of one security return with another. +arkowitz +odel $isk is discussed here in terms of a portfolio of assets. As referred to earlier, any investment risk is the variability of return on a stock, assets or a portfolio. It is measured by standard deviation of the return over the +ean for a number of observations. 1.=.3 PORTFOLIO RIS4 'hen two or more securities or assets are combined in a portfolio their covariance or interactive risk is to be considered. Thus if the returns on two assets move together,

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their covariance is positive and the risk is more on such portfolio. If on the other hand, the returns move independently or in opposite directions, the covariance is negative and the risk in total will be lower. +athematically the covariance is defined as

'here $" is return on security ", $y return security S, and $" and $y are e"pected returns on them respectively and & is the number of observations. The coefficient of correlation is another measure designed to indicate the similarity or dissimilarity in the behavior of two variables. 'e define the coefficient of correlation of " and y as

where 1ov "y is the covariance between " and y and ;" is the standard deviation of " and ;y is the standard deviation of y. 1.=.! MAR4O<IT> EFFI)IENT FRONTIER The graphical depiction of the +arkowitz efficient set of portfolios representing the boundary of the set of feasible portfolios that have the ma"imum return for a given level of risk. Any portfolios above the frontier cannot be achieved. Any below the frontier are dominated by +arkowitz efficient portfolios. Fi . 1.1 Mar/o9it1 Effi'ient Frontier

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1.1? S#ARPE IN"E@ MO"EL The +arkowitz model is e"tremely demanding in its data needs for generating the desired efficient portfolio. It re!uires &(&RF)/6 estimates (& e"pected returns R & variances of returns R &T(&%4 )/6 uni!ue co variances of returns). :ecause of this limitation the single inde" model with less input data re!uirements has emerged. The (ingle inde" model re!uires F&R6 estimates (estimates of alpha for each stock, estimates of beta for each stock, estimates of variance ei6 for each stock, estimate for e"pected return on market inde" and an estimate of the variance of returns on the market inde" m6 to use the +arkowitz optimization framework. The single inde" model assumes that co%movement between stocks is due to movement in the inde". The basic e!uation underlying the single inde" model is* $i O ai R T$m where $i O $eturn on the ith stock ai O component of security i>s that is independent of market performance O coefficient that measures e"pected change in $i given a change in $m $m O rate of return on market inde" The term ai in the above e!uation is usually broken down into two elements a i which is the e"pected value of ai and ei which is the random element of ai. The single inde" model e!uation therefore, becomes* $iO i R $m R ei (ingle inde" model has been criticized because of its assumption that stock prices move together only because of common co%movement with the market. +any researchers have found that there are influences beyond the market, like industry% related factors, that cause securities to move together. 0mpirical evidence, however, reveal that the more comple" models have not been able to consistently outperform the single inde" model in terms of their ability to predict e"%ante (future) co%variances between stock returns.

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1.11 RIS4 MANAGEMENT $isk management deals with strategies to cope with risk in a portfolio, it tries to !uantify the potential for losses and then take suitable actions to minimize these depending on the investment ob,ectives. +ainly the idea of managing risk has come from the increased volatility of the market interest rate and e"change rate. 'ithin the risk management field, any type of procedure used to control or manage risk aims at limiting the investors> e"posure to risk. $isk management today is focusing too much on the risk reduction part, and disregards the fact that risk management is also about increasing the e"posure to risk when appropriate to do so. The practice of risk management is slowly coming into play in portfolio management even though it has been around at least since the market crash of ;ctober 45I7. 3owever that risk management is currently considering the portfolio risk after the portfolio has been put together instead of during the portfolio composition. This is in contrary to +arkowitz> theories that return and risk should be considered together when designing a portfolio and +acGueen believes more work is needed in this area even though the growing popularity of risk management is a positive step. The connection between the portfolio performance and the characteristics of the portfolio/risk manager is e"amined by 1hevalier and 0llison. They came to the conclusions that the large difference between managers> performance were due to behavioral differences and selection biases. )und managers who attended colleges with higher grade re!uirements did also perform better on risk%ad,usted basis. #e- in & ;ne option investors have within risk management is using hedging. It can be used in any type of investment where risk is ,udged to be great and a procedure is needed for managing this. 3edging can work as insurance to the investor, making sure he/she is covered if the market moves opposite to the planned future. This could be adding a short position in a futures contract to the already set long position. This way the investor is covered if potential declines occur. 3edging does not provide an ultimate risk management since it only can combat market risk and not firm specific

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risk through derivative contracts- these are according to Brinblatt U Titman best covered by regular insurances. 3edging can be used in managing many potential risks such as ta"es, oil prices, and price fluctuations but also to secure future capital. "iversifi'ation& The classical e"pression @Eon>t put all your eggs in one basketA is e"actly what diversification is all about, i.e. reducing the portfolio risk by investing in different assets that are be%having differently in different market conditions. The reasoning behind this is that if some assets are performing poorly some other assets will counteract and perform well instead. Eiversification eliminates the unsystematic risk and lowers the total risk down to the market risk or the systematic risk which cannot be diversified away. A well%diversified portfolio should consist of more than 68 securities, however too many securities decreases the positive effects of diversification since the transaction and monitoring costs increase more than the benefits. 1.12 RET:RN (ince risk is something an investor has to face when investing it is impossible to talk about risk without talking about the return as well. According to standard portfolio theory, these two are connected in any decision that one make, a higher risk must mean a potential higher return. If this does not hold no one would purchase a risky security if it would not offer a higher reward. 'hat most market participants try to do is to minimize the risk in a portfolio while increasing the e"pected return. To understand the concept of risk the e"pected return must be understood. The return depends on the increase/decrease in the price of the share over the investment horizon as well as dividend income the share has provided. This is called the holding%period return (3.$) and can also be e"plained by the following formula. 0nding price J :eginning price 3.$O :eginning .rice .revious assumptions of economic behavior being linear may no longer be true. $esearch says that investors view risk and e"pected return as being non%linear. This R Eividend Sield

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due to the interactions between participants, prices, information and general economical fluctuations.

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REVIE< OF LITERAT:RE &umbers of reviews had been conducted about Investment .ortfolio +anagement .ractices Among $espondents but due to paucity of time, a few snapshots of literature are given here. ,ro9ne 61===7 analyzed that active portfolio management was concerned with ob,ectives related to the outperformance of the return of a target benchmark portfolio. 3e considered a dynamic active portfolio management problem where the ob,ective was related to the tradeoff between the achievement of performance goals and the risk of a shortfall. (pecifically, he considered an ob,ective that related the probability of achieving a given performance ob,ective to the time taken to achieve the ob,ective. That allowed a new direct !uantitative analysis of the risk/return tradeoff, with risk defined directly in terms of probability of shortfall relative to the benchmark and return defined in terms of the e"pected time to reach investment goals relative to the benchmark. The resulting optimal policy was a state dependent policy that provided new insights. As a special case, his analysis included the case where the investor wanted to minimize the e"pected time until a given performance goal was reached sub,ect to a constraint on the shortfall probability. R%an an- S'(nei-er 62??37 e"amined the implications of the escalation in institutional invest power and heterogeneity for two dominant theories of corporate governance agency theory and stakeholder theory. )rom that analysis, a new view of the agency relationship between institutional investors and their portfolio firms emerged, which recognized the institutions> market power, comple" role as financial intermediaries, and possible involvement in simultaneous and opposing agency contracts.

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They also concluded that stakeholder theorists should be reconsidered these newly empowered share holders> moral standing in relation to their portfolio firms, and the identities and goals of those modern investors should be ree"amined. To that end, they demonstrated that a novel, intra group application of +itchell, Agle, and 'ood>s stakeholder framework to heterogeneous institutional investors illuminated their varying levels of stakeholder salience. Ro2erts et al 62??.7 had drawn on a series of in%depth interviews with senior managers from institutional investors and large listed corporations to e"plore how different conceptualizations of institutional investors, their role in the corporate governance process, and their interactions with corporate management, were reflected in the accounts of the actors concerned. They found that the conceptualizations in terms of ownership and agency that dominate both academic and popular discourses were marginal to the actors> accounts. $ather, both fund managers and company managers conceptualize institutional investors primarily as financial traders who happened as a result of their trading, to control key resources, but whose interests were effectively divorced from those of long%term share owners. Their analysis suggested that far from being mitigated by the large share blocks of institutional investors, as some commentators have suggested, the separation of ownership from control had been compounded in the 2V by a separation of accountability from responsibility, with the interests of the institutions holding managers accountable being !uite different from those of the owner%beneficiaries to whom they felt responsible. That raised significant challenges for corporate governance policy as well as new issues for research into the governance process.

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T(omas et al 62??57 introduced a new measure, combining e"ternal environmental costs with established measures of economic value added, and demonstrated how that measure could be incorporated into financial analysis. They proposed that e"ternal environmental costs were relevant to all investors* universal investors were concerned about the scale of e"ternal costs whether or not regulations to internalize them were likelymainstream investors needed to understand e"ternal costs as an indication of future regulatory compliance costs- and ($I investors needed to evaluate companies on both financial and social performance. They illustrated new measure with data from 2( electric utilities and illustrated how the environmental e"posures of different fund managers and portfolios could be compared. 'ith such measures fund managers could understand and control portfolio%wide environmental risks, demonstrated their environmental credentials !uantitatively and ob,ectively and competed for the increasing number of investment mandates that had an environmental component. Gl+s(/ov An- Statman 62??=7 analyzed that socially responsible

investors tilt their portfolios toward stocks of companies with high scores on social responsibility characteristics and shun stocks of companies associated with tobacco, alcohol, gambling, firearms, and military or nuclear operations. Analyzing 4556%6887 returns of stocks rated on social responsibility, they found that that tilt gave such investors an advantage over conventional investors. They also found that shunning resulted in a disadvantage for such investors relative to conventional investors. The advantage from tilting toward stocks of companies with high social responsibility scores was largely offset by the disadvantage from the e"clusion of stocks of shunned companies. (ocially responsible investors could thus do both well and good by adopting the best%in%class method in

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constructing their portfolios* tilting toward stocks of companies with high scores on social responsibility characteristics but refraining from shunning stocks of any company. #e 62??=7 analyzed investors choice to be active or passive and develop a model of the money management industry. 3e made use of a noisy rational e"pectations e!uilibrium framework with endogenous information production and endogenous choice of investment channels. In his model, agents could choose one of three investment channels* directly manage their own money, delegate the management of their money to professionals, or become money managers who charge proportional asset management fees. $etail investors and money managers then chose their own optimal level of effort to produce information and trade risky assets. 'hile delegators did not pay costs to ac!uire information, their investment returns depended on the performance of money managers they hire. In e!uilibrium, agents with low information production costs and high initial wealth managed their own money- those with low information production costs but low initial wealth would become money managers- and those with high information production costs would choose delegated portfolio management, regardless of wealth. 3e solved for the relative population of delegators and retail investors, the e!uilibrium size and structure of the money management industry, as well as the e!uilibrium asset prices. As such, the model yielded new implications on the relationship between various attributes of the economy and the e!uilibrium e!uity premium. 3e found that an investor based with lower average information production costs tends to have more total delegated wealth, more money managers, smaller individual holdings of corporate e!uity, higher price in formativeness, and a lower e!uity premium.

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Aa'o2s an- <e2er 62??=7 evaluated the out%of%sample performance of numerous asset allocation strategies from the perspective of a 0uro zone investor. :esides an increased sample period from Wanuary 457F to Eecember 688I, their contribution to the literature was twofold. )irst, we compared the performance of a broad spectrum of heuristic portfolio policies with a large set of well%established model e"tensions of the +arkowitz (45H6) mean%variance framework. (econd, they e"plicitly differentiated between two prominent ways of diversification that were usually analyzed separately* international diversification in the stock market and diversification over different asset classes. Their analysis allowed them to compare and discuss different diversification strategies to construct a 9world market portfolio9 that was as e"%ante efficient as possible. )or international e!uity diversification, they found that none of the +arkowitz%based portfolio models was able to significantly outperform simple heuristics. Among those, the BE. weighting dominated the traditional cap%weighted approach. In the asset allocation case, +arkowitz models were again not able to beat a broad spectrum of fi"ed%weight alternatives out%of%sample. Analyzing more than H888 heuristics, they found that in fact almost any form of well%balanced allocation over asset classes offered similar diversification gains as even very sophisticated and recently developed portfolio optimization approaches. :ased on their findings, they suggested a simple and cost% efficient allocation approach for private investors. Mittal an- V%as 62??=7 analyzed that men and women differ in their risk and investment styles. 'omen were more risk averse and prefer low risk fi"ed income investments. .sychologists suggested the reason for their different investing style was that women were more methodical in information processing strategy, which lead to increased perception of

36

risk as compared to men. The article investigated whether gender differences e"ist in the preferences for risk and whether the reasons suggested by psychologists for women being more risk averse were valid. Roon et al 62??=) They empirically modeled a number of emotional assets in the optimal investment decision. 2sing the spanning techni!ues they analyzed how those emotional assets added to the risk%return profile of investors. They found highly significant results for art, wine and books as a significant allocation into the emotional asset sector. Their findings firstly substantiated the current allocation of 3&'I in the lu"ury goods sector, and secondly gave rise to substantive evidence for investors choosing to ma"imize risk and return whilst also being prepared to give up some financial return in some sectors for emotive reasons. That gave insightful evidence that investors tend to integrate both personal and societal values into the portfolio management process and moreover helped them to separate the emotional and investment value when investing into assets in general. <ar- et al 62??=7 looked at how a negative third%party !uality signal, in the form of e"ternal monitoring of firm performance by an investor group, prompted a response from both institutional investors and the firms publicly identified as poor performers. 2sing a sample of 5F firms placed on the )ocus ?ist of the 1ouncil of Institutional Investors from 6888 to 688H and a comparison group of 5D firms in the bottom !uartile in stock performance from the (U.H88, the authors found that institutional investors responded to that negative third%party signal by reducing their holdings in firms that received that public repudiation. 3owever, that reduction in holdings is moderated by the independence of the board of the targeted firm. That result suggested institutional investors paid particular attention to the governance characteristics of

37

underperforming firms. ?astly, the authors found that targeted firms with more independent boards responded by increasing the intensity of incentives of the 10;, thus signaling their responsiveness to investor concerns. The perusal of the literature had revealed that active portfolio management was concerned with ob,ectives related to the outperformance of the return of a target benchmark portfolio. (ocially responsible investors tilt their portfolios toward stocks of companies with high scores on social responsibility characteristics and shun stocks of companies associated with tobacco, alcohol, gambling, firearms, and military or nuclear operations. +en and women differ in their risk and investment styles. 'omen were more risk averse and prefer low risk fi"ed income investments. The focus was more on institutional investors not on individual investors. The review of literature has not focused on investment practices of individual investors, their investment preferences and ob,ectives, their perception towards risk and whether they do any analysis or apply model while portfolio management .

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3.1 NEE" The need of the study is to fill the gap between what had already been researched by the previous works and what the ob,ectives of this study. .revious studies had focused on institutional investors not on investors individually. (o, the focus was on how investors apply the concept of risk in portfolio management. The need was also to study about investor>s investment preferences and ob,ectives and what concepts they applied during investment portfolio management. 3.2 S)OPE The scope of the study was limited to Walandhar city only. It comprised of all the portfolio investors from different professional categories namely :usinessmen, lawyers, government employees etc. 3.3 O,AE)TIVES OF T#E ST:"$ To achieve following ob,ectives research was conducted* 1. To find awareness among investors towards investment portfolio management. 2. To know investors> perception towards risk in managing portfolio. 3. To e"amine investors> investment preferences and ob,ective. !. To know investors> style of investment portfolio management. *. To know investors> analysis techni!ue/model preference for investment portfolio management.

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RESEAR)# MET#O"OLOG$
$esearch +ethodology is a way to systematically solve the research problem. The $esearch +ethodology includes the various methods and techni!ues for conducting a $esearch. @+arketing $esearch is the systematic design, collection, analysis and reporting of data and finding relevant solution to a specific marketing situation or problemA. E. (lesinger and +.(tephenson in the encylopedia of (ocial (ciences define $esearch as @the manipulation of things, concepts or symbols for the purpose of generalizing to e"tend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the practice of an artA. $esearch is, thus, an original contribution to the e"isting stock of knowledge making for its advancement. The purpose of $esearch is to discover answers to the Guestions through the application of scientific procedures. This pro,ect has a specified framework for collecting data in an effective manner. (uch framework is called @Resear'( "esi nB. The research process followed consists of following steps* !.1 RESEAR)# "ESIGN A research design was the arrangement of conditions for collection U analysis of data in a manner that aims to combine relevance to the purpose with economy in procedure. $esearch design was needed because it facilitates the smooth sailing of various research operations, thereby making research as efficient as possible yielding ma"imal information with minimal e"penditure of effort, time and money. The present study had used descriptive research design. It involves collecting data through self reports collected or through observation. $esearch described the variables already e"ists and were not much under control. !.1.1 "es'ri0tive Resear'(& Eescriptive research is a research where in researcher has no control over variable. It ,ust presents the picture, which has already studied. It is a type of conclusive research, which has as its ma,or ob,ective the description of something%usually market characteristics or functions. In other words !.1.2 )on'l+sion Oriente- Resear'(& $esearch designed to assist the decision maker in the situation. In other words it was a research when given our own views about the research.

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!.2 SAMPLING "ESIGN (ampling can be defined as the section of some part of an aggregate or totality on the basis of which ,udgment or an inference about aggregate or totality is made. The sampling design helps in decision making in the following areas* % !.2.1 :niverse of t(e st+-%& The universe comprised of two parts as theoretical universe and accessible universe. T(eoreti'al :niverse8 It included the portfolio investors all over world. A''essi2le :niverse8 It included the portfolio investors in India !.2.2 Sam0lin :nit& 'ho was to be surveyed< The target population must be defined that has to be sampled. It was necessary so as to develop a sampling frame so that everyone in the target population had an e!ual chance of being sampled. (ampling unit of the study was the portfolio investors of different occupations and residing in Walandhar city. !.2.3 Sam0le Si1e& (ample size refers to the total number of items about which the information is desired. The sample size of the study was 488. !.2.! Sam0lin Te'(niC+e& The sampling techni!ues used was non% probability. The researcher has to decide whether the information was to be obtained from every unit of population under study or only a portion of population will be used. In this study convenience sampling had been used. In this type of sampling where the researcher selects the sample according to his or her convenience. !.3 "ATA )OLLE)TION AN" ANAL$SIS !.3.1 "ata )olle'tion& Information had been collected from primary and secondary data. Se'on-ar% So+r'es& (econdary sources collect data known as published data. Eata which were not originally collected was called secondary data. The first step in any research was the collection of secondary data. In this pro,ect, data was collected from internet. Primar% So+r'es& .rimary Eata was obtained from respondents with the help of widely used and well known method of survey. In this study primary data is collected through !uestionnaire. Guestionnaire was a list of !uestions given to

43

number of persons for them to answer. It secures standardized results that can be tabulated and treated statistically. In this !uestions were presented with e"actly the same wordings and the same form to all the respondents. !.3.2 Tools of Presentation an- Anal%sis& In the current study, data has been presented through figures and tables. After collecting the data has been analyzed through charts, summated score and percentage to analyze the collected data. The data should necessarily be condensed into few manageable groups and tables for further analysis. Thus it helps to classify the raw data into some purposeful and useable categories. !.! LIMITATIONS OF T#E ST:"$ The following were the limitations of the study* Analysis was only a mean and end in itself. The analyst had to make interpretations and draw own conclusions. Eifferent people may interpret the same thing in different ways. Thus there was chance of personal biasness in interpretations. Eue to shortage of time available at disposal, we were not able to collect as much information as needed for the study. As there was always a cost factor involved in every research, so it was not possible to include larger part of the universe. The sample may not be a true representative, as due to location factor, the respondents may not be representative of the whole universe. There may be untrue information provided by the respondents, for the study.

44

45

"ATA ANAL$SIS AN" INTERPRETATION The data has been processed and analyzed by tabulation interpretation so that findings can be communicated and can be easily understood. The findings are presented in the best possible way. Tables and pie charts had been used for illustration of principle findings of the research. *.a "emo ra0(i' Profile of Res0on-ents. Ta2le *.a& "emo ra0(i' Profile "emo ra0(i's Gen-er +ale )emale Total A e ?ess than F8 yrs F8 J C8 yrs C4 % H8 yrs +ore than H8 yrs Total O''+0ation :usinessman ?awyer Bovernment 0mployee ;thers Total CI F F7 46 488 CI F F7 46 488 I CH 6I 45 488 I CH 6I 45 488 DI F6 488 DI F6 488 No. of Res0on-ents Da e of Res0on-ents

Anal%sis an- Inter0retation& It was found that sample consist of DIN was male and F6N was female. And ma,ority of respondents that is CHN was of age group F8%C8 yrs and 6IN was of C4%H8 yrs and were businessman.

46

Statement 1& Investors (a- Mana e- O9n Portfolio for Investment.

Ta2le *.1& Investment Portfolio Mana ement Mana eSes &o 1an>t (ay Total No. of Res0on-ents 488 8 8 488 Da e of Res0on-ents 488 8 8 488

Fi +re *.1& Investment Portfolio Mana ement

Anal%sis an- Inter0retation& It was found out that all the respondents in the sample had managed their own portfolio. (o it has been concluded investors had managed their own portfolio.

Statement 2& A9areness Level Re ar-in Investment Portfolio Mana ement.

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Ta2le *.2& A9areness Level A9areness Level )ully Aware .artially Aware Total No. of Res0on-ents 77 6F 488 Da e of Res0on-ents 77 6F 488

Fi +re *.2& A9areness Level

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is in 77N of respondents were fully aware and 6FN of respondents were partially aware about investment portfolio management. (o it has been concluded that ma,ority of investors were fully aware about investment portfolio management.

Statement 3& FreC+en'% of Portfolio Mana ement.

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Ta2le *.3& FreC+en'% of Portfolio ,ein Mana eNo. of Res0on-ents D5 F4 488 Da e of Res0on-ents D5 F4 488

)re!uency Always (ometimes Total

Fi +re *.3& FreC+en'% of Portfolio ,ein Mana e-

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is D5N of the respondents always had managed portfolio and F4N of respondents managed their portfolio sometimes. (o it has been concluded that ma,ority of investors had always managed their portfolio.

Statement !& So+r'e of Information for Investment Portfolio Mana ement. Ta2le *.!& So+r'e of Information for Investment Portfolio Mana ement

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)ons+lt 1A :roker )riend ;thers &obody Total

No. of Res0on-ents 4H C4 C 6 FI 488

Da e of Res0on-ents 4H C4 C 6 FI 488

Fi +re *.!& So+r'e of Information for Portfolio Mana ement

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is in C4N of respondents consulted broker, FIN did not consult anybody, 4HN consulted 1A, CN consulted friends and 6N consulted others that is peers. (o it has been concluded that ma,ority of investors consulted broker for portfolio management. Statement *& T%0e of Portfolio Sele'te- for Investment.

Ta2le *.*& T%0e of Portfolio

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T%0e .atient Aggressive 1onservative Total

No. of Res0on-ents CD 65 6H 488

Da e of Res0on-ents CD 65 6H 488

Fi +re *.*& T%0e of Portfolio

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is in CDN of the respondents invested in patient type of portfolio, 65N in aggressive and 6HN in conservative type. (o it has been concluded that ma,ority of investors had invested in patient type of portfolio. Statement .& O2Ee'tive of Investment Portfolio Mana ement. Ta2le *..& O2Ee'tive of Investment O2Ee'tive 1urrent Income No. of Res0on-ents 4I Da e of Res0on-ents 4I

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Browth In Income 1apital Appreciation .reservation ;f 1apital ;thers Total

F5 FF 7 F 488

F5 FF 7 F 488

Ta2le *..& O2Ee'tive of Investment

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is in F5N of respondents had growth in income as portfolio investment ob,ective, FFN had capital appreciation, 4IN had current income, 7N had preservation of capital and FN had some other ob,ectives. (o it has been concluded that ma,ority of investors had growth in income as the ob,ective for investment. Statement 5& Ran/in of t(e Portfolio Investment Preferen'es of Investors.

Ta2le *.5& Ran/in of t(e Portfolio Investment Preferen'es Preferen'es S+mmate- S'ores Total Ran/

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Sield ?i!uidity (afety

DDT4R65T6RCTF 6T4R4FT6RIHTF F4T4RHIT6R44TF

4FD 6IF 4I8

4 F 6

(1 is most im0ortant an- 3 is least im0ortant7

Anal%sis an- Inter0retation& )or the listed F preferences for portfolio investment, the first rank being the most important was given to the yield and the last rank i.e. F was given to li!uidity. (o it has been concluded that yield was the first preference for portfolio investment.

Statement ;& InvestorsF A00roa'( to Portfolio Mana ement.

Ta2le *.;& Portfolio Mana ement A00roa'( A00roa'( Active +anagement No. of Res0on-ents D7 Da e of Res0on-ents D7

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.assive +anagement Total

FF 488

FF 488

Fi +re *.;& Portfolio Mana ement A00roa'(

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is D7N of respondents managed their portfolio actively and FFN managed passively. (o it has been concluded that ma,ority of investors approach to portfolio management was active management.

Statement =& "efinition of Ris/. Ta2le *.=& Ris/ "efinition "efinition #ery (ub,ective, 3ard To Bive ;ne Eefinition ?ose ;f +oney In Absolute No. of Res0on-ents 4D 6H Da e of Res0on-ents 4D 6H

54

Terms #olatility ;f $eturns 2nderperform A :enchmark )ailing To +eet ;ne>s Boals Total CC D 5 488 CC D 5 488

Fi +re *.=& Ris/ "efinition

Anal%sis an- Inter0retation& It was found out that in ma,ority i.e. CCN of respondents defined risk as volatility of returns, 6HN as lose of money in absolute terms, 4DN as very sub,ective term hard to give one definition, 5N as failing to meet one>s goals and DN as underperform a benchmark.. (o it can be concluded that according to ma,ority of respondents risk could be defined as volatility of returns. Statement 1?& Ris/ t(at Effe'ts Portfolio t(e Most.

Ta2le *.1?& Ris/ Affe'ts t(e Most Ris/ (ystematic $isk No. of Res0on-ents 7I Da e of Res0on-ents 7I

55

2nsystematic $isk Total

66 488

66 488

Fi +re *.1?& Ris/ Affe'ts t(e Most

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is 7IN of respondents were of the view that systematic risk affected portfolio the most and according to 66N unsystematic affected the most. (o it has been concluded that ma,ority of investors were of the view that systematic risk affected portfolio the most.

Statement *.11& :ns%stemati' Ris/ t(at Affe'ts t(e Portfolio.

Ta2le *.11& :ns%stemati' Ris/ t(at Affe'ts :ns%stemati' Ris/ :usiness $isk No. of Res0on-ents 47 Da e of Res0on-ents 47

56

)inancial $isk :oth Total

5 7C 488

5 7C 488

Fi +re *.11& :ns%stemati' Ris/ t(at Affe'ts

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is 7CN of respondents were of the view that both the unsystematic risk i.e. financial risk and business risk affected the portfolio, according to 47N business risk affected and according to 5N financial risk affected the portfolio. (o it has been concluded that ma,ority of investors were of the view that both the unsystematic risk i.e. financial risk and business risk affected the portfolio. Statement *.12& Ran/in t(e S%stemati' Ris/s t(at Affe't t(e Portfolio.

Ta2le *.12& Ran/in t(e S%stemati' Ris/ S%stemati' Ris/ +arket $isk Interest $ate $isk S+mmate- S'ore CFT4RFHT6R66TF F4T4RC6T6R67TF Total 475 455 Ran/ 4 6

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.urchasing .ower $isk

6DT4R6FT6RH4TF

66H

(1 is most im0ortant an- 3 is least im0ortant7

Anal%sis an- Inter0retation& )or the listed three systematic risks that affected the portfolio, the first rank being the most important was given to the market risk and the last rank i.e. F was given to purchasing power risk. (o it has been concluded that market risk systematic risk affected portfolio.

Statement *.13& )(ara'teri1ation of Ris/ G Ret+rn )onne'tion.

Ta2le *.13& Ris/ G Ret+rn )onne'tion )onne'tion &o 1onnection Eirect 1onnection Inverse 1onnection No. of Res0on-ents 47 I4 6 Da e of Res0on-ents 47 I4 6

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Total

488

488

Fi +re *.13& Ris/ 8 Ret+rn )onne'tion

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is according to I4N of the respondents risk and return had direct connection, according to 47N no connection and according to 6N inverse connection e"isted between risk and return. (o it has been concluded that ma,ority of investors were of the view that direct connection e"isted between risk and return. Statement *.1!& Anal%sis ,ein "one <(ile Sele'tin Se'+rities.

Ta2le *.1!& Anal%sis "one "+rin Se'+rities Sele'tion Anal%sis )undamental Analysis Technical Analysis &o Analysis Total No. of Res0on-ents FF C5 4I 488 Da e of Res0on-ents FF C5 4I 488

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Fi +re *.1!& Anal%sis "one "+rin Se'+rities Sele'tion

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is C5N of the respondents did technical analysis, FFN fundamental analysis and 4IN no analysis while selecting securities. (o it has been concluded that ma,ority of investors did technical analysis while selecting securities. Statement *.1*& Mo-el Preferre- for Portfolio Mana ement.

Ta2le *.1*& Mo-el PreferreMo-el +arkowitz +odel (harpe Inde" +odel Eon>t Vnow Total No. of Res0on-ents F4 CD 6F 488 Da e of Res0on-ents F4 CD 6F 488

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Fi +re *.1*& Mo-el Preferre-

Anal%sis an- Inter0retation& It was found out that in ma,ority of the sample that is CDN of respondents preferred (harpe inde" model, F4N +arkowitz model and 6FN had no knowledge about the models. (o it has been concluded that ma,ority of the investors> preferred (harpe inde" model for portfolio management.

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62

FIN"INGS OF T#E ST:"$

)rom the study, following findings have emerged*%
1. 2.

All investors had managed their own portfolio for investment. +a,ority of investors were fully aware about investment portfolio management. .ortfolio had been always managed by ma,ority of investors. +ost of investors consulted broker for information regarding portfolio management. Type of portfolio preferred by most of the investors was patient portfolio. ;b,ective of portfolio investment of large number of investors was growth in income. Sield was most and li!uidity was least preferred by investors for portfolio investment. Approach preferred by most of the investors for portfolio management was active management. +ost of the investors defined risk as volatility of returns. +a,ority of the investors were of the view that systematic risk affected portfolio the most. Investors were of the view that both the unsystematic risk i.e. financial risk and business risk affected portfolio. (ystematic risk that affected portfolio most was market risk and least was purchasing power risk. A large number of investors were of the view that there was direct connection between risk and return. Technical analysis was preferred by ma,ority of the investors over fundamental analysis for selecting securities. +ost of the investors preferred (harpe inde" model over +arkowitz model for portfolio management.

3. 4.

5. 6.

7.

8.

9. 10.

11.

12.

13.

14.

15.

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5.2 RE)OMMEN"ATIONS The following recommendations were made after the research*
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:rokers should give appropriate suggestions to investors as Investment .ortfolio +anagement decision was greatly influenced by brokers. Investors preferred growth in income and yield- they should consider other factors like current income, safety also. Investors were of the view that systematic risk affects portfolio the most, they should not neglect unsystematic risk. Investors were of the view that risk and return relationship is direct, this may not always true, and investors should actively consider their connection for different securities. Investors should do proper security analysis while selecting securities through different analysis. Investors should have proper knowledge regarding portfolio construction models and should manage accordingly.

11

11

11

11

11

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5.1 )ON)L:SION .ortfolio is a collection of investments all owned by the same

individual or organization. .ortfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. e!uity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to ma"imize return at a given appetite for risk. )undamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. Technical analysis is a security analysis discipline for forecasting the future direction of prices through the study of past market data, primarily price and volume. The recent studies had identified that active portfolio management was concerned with ob,ectives related to the outperformance of the return of a target benchmark portfolio. (ocially responsible investors tilt their portfolios toward stocks of companies with high scores on social responsibility characteristics and shun stocks of companies associated with tobacco, alcohol, gambling, firearms, and military or nuclear operations. +en and women differ in their risk and investment styles. 'omen were more risk averse and prefer low risk fi"ed income investments. The ob,ective of study is to know how investors apply the concepts of risk in portfolio management and the relationship between risk and return and to know what concepts they apply while investment portfolio management. The limitations of the (tudy will be chances of personal biasness in interpretations, survey will be conducted on small sample of 488 respondents and due to shortage of time available at disposal, it will not be possible to collect as much information as needed for the study. The findings of the study conducted on investors were that ma,ority of investors consulted broker for portfolio management and invested in patient type of portfolio. Browth in income was ma,or ob,ective and yield was mostly preferred. +a,ority actively managed portfolio and volatility of returns was their risk definition and they were of view that there e"ist direct relationship between risk and return. +ost of the investors preferred Technical analysis and (harpe inde" model.

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,I,LIOGRAP#$
:rowne (4555). $isk constrained dynamic active portfolio management. from http*//papers.ssrn.com/solF/papers.cfm<abstractXidO6856C8 Blushkov and (tatman (6885). 0!uity investments* $esearch sources- Investment theory* 0fficient market theory- .ortfolio management* 0!uity strategies. from http*//papers.ssrn.com/solF/papers.cfm<abstractXidO4CCCFHH 3e (6885). Information production, retail investors, and delegated portfolio management. from http*//papers.ssrn.com/solF/papers.cfm<abstractXidO4FCF65C Wacobs and 'eber (6885). 3ow should private investors diversify< An empirical evaluation of alternative asset allocation policies to construct a 'orld market portfolio., from http*//papers.ssrn.com/solF/papers.cfm<abstractXidO4C745HH +ittal and #yas (6885). Eo women differ in their investment information processing from, http*//i,g.sagepub.com/cgi/content/abstract/4D/4/55 $oberts et al (688D). ;wners or traders< 1onceptualizations of institutional investors and their relationship with corporate managers. from http*//hum.sagepub.com/cgi/content/abstract/H5/I/4484 $oon et al (6885). 0motional assets and investment behavior. from http*//papers.ssrn.com/solF/papers.cfm<abstractXidO4FC4I7H $yan and (chneider (688F). Institutional investor power and heterogeneity. from http*//bas.sagepub.com/cgi/content/abstract/C6/C/F5I Thomas et al (6887). Integrated environmental and financial performance metrics for investment analysis and portfolio management. from http*//papers.ssrn.com/solF/papers.cfm<abstractXidO5ICFFD 'ard et al (6885). 2nder the spotlight* institutional investors and firm responses to the council of institutional investors annual focus ?ist. from http*//so!.sagepub.com/cgi/content/abstract/7/6/487

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H:ESTIONNAIRE
Eear respondent, I $a,winder Vaur student of 1.T.I.0.+.T. am conducting a research on @Investment .ortfolio +anagement .ractices Among InvestorsA. I am conducting a survey to know the portfolio investors practices and preferences for investment. (o I re!uest you to fill this form. It will take only 6%H minutes for you to fill this. 4. 3ave you ever managed your own .ortfolio for Investment< a) Ses c) 1an>t say 6. 'hat is your awareness level regarding .ortfolio +anagement< a) )ully aware c) &ot aware F. 3ow fre!uently you manage .ortfolio< a) Always c) &ever C. 'hom do you consult while decision process regarding Investment .ortfolio +anagement< a) 1A c) )riend e) &obody H. 'hich is type of .ortfolio you construct and invest< a) .atient c) 1onservative b) Aggressive b) :roker d) ;thers b) (ometimes b) .artially aware b) &o

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D. 'hat is your ob,ective of Investment .ortfolio +anagement< a) 1urrent income c) 1apital appreciation b) Browth in income c) .reservation of capital

7. .lease rank the following .ortfolio Investment preferences, from 4%F (where 4 is most important and F is least important) a) Sield c) (afety I. 'hat is your .ortfolio +anagement approach< a) Active management 5. 3ow would you define risk< a) #ery sub,ective, hard to give one definition b) ?ose of money in absolute terms c) #olatility of returns d) 2nderperform a benchmark e) )ailing to meet one>s goals 48. 'hich risk according to you affects the .ortfolio the most< a) (ystematic $isk b) 2nsystematic $isk b) .assive management b) ?i!uidity

44. 'hich type of unsystematic risk according to you affects the .ortfolio< a) :usiness $isk c) :oth 46. .lease rank the following systematic risks that affect .ortfolio, from 4%F (where 4 is most important and F is least important)*% a) +arket $isk b) Interest $ate $isk c) .urchasing .ower $isk b) )inancial $isk

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4F. 3ow would you characterize the connection between risk and return< a) &o 1onnection b) Inverse 1onnection 4C. 'hich analysis you do while selecting securities< a) )undamental Analysis c) &o Analysis 4H. 'hich model do you prefer for .ortfolio +anagement< a) +arkowitz +odel c) Eon>t know c) (harpe Inde" +odel b) Technical Analysis b) Eirect 1onnection

.ersonal Information* &ame* YYYYYYYYYYYYYYYY.. Age* YYYYYYYYYYYYYYYYY. Bender* YYYYYYYYYYYYYYYY ;ccupation* YYYYYYYYYYYYYY Thank you for your co%operation.

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