Contents

Session-1.................................................................................................................................................2
Session-2.................................................................................................................................................9
Session-3...............................................................................................................................................15
Session-4...............................................................................................................................................20
Session-5...................................................................................................................................................33
Session 6....................................................................................................................................................39
Session-7...................................................................................................................................................43
Session-8...................................................................................................................................................49

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Session-1

Generally mutual fund is chosen – as more data would be available

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See portfolio composition quarterly and analyse

Course focuses on financial assets

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Most desirable= investment goal and objective
Properties= risk & return, liquidity

Real estates, hedge fund and

private equity as alternative
asset class
High yields vs investment grade
bonds

Perspective of fund manager in

this course

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D > (B,C) > A

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Session-2

Crisil will start assigning ESG scores (some investors are concerned abt environment)

Why companies want to achieve net debt zero?

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Investor Questionnaire by Vanguard

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Conditional Market Order
Buy at 2000 , sell the stock at market order if share price touches the stock price of 2100
Or it could be 1900 to stop loss

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Stop Buy – certain price it will buy
Stop Sell
Conditional Limit Order- Share price= trigger price

Condition Orders

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Tone analysis
Facial recognition features

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Noise Traders= Speculative traders

Session-3

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Covar could be also return as σ2AB

Here adjusted closing price is taken for the returns because it is adjusted for stock split, dividend, etc
Historical avg works if we predict futures is similar to history

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Correlation= -1; Linear straight line (orange)
Correlation=1, straight line (Blue)

MVP= Minimum variance portfolio; all the points after/ below mvp is inefficient and above is efficient

What about more than 2 risky assets?

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If N tends to infinity then variance of portfolio is covariance between securities

How to compute such a large no of securities?

Return- Transpose of weigh * return

See Excel second sheet

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Risk is also linearly related to portfolio

Capital allocation line is straight line from the point on frontier

Best capital allocation line is tangent to the curve which is called CML

Sharpe ratio is the slope of the line

Conservative investors are below M, w1 and w2 are between 0 and 1
Aggressive investors are above M, w1 would be less than 0 and w2 will be greater than 1

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If risk free asset is not available, then either expected return should be given or expected risk needs to
be given.

Session-4

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Diversified investor only looks at covariance risk rather than variance risk

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  In real life, expectations would be different
 Passive investment is the assumption (Passive is to invest in nifty and active is to try to beat nifty
by deviating from nifty stock
 Aggressive is investing more than you have in market

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This will reduce concentration risk

The Markowitz model is dynamic equilibrium model

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Repo is secured bonds

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Closed ended- enter only one time

Good website for mutual fund- miraeassetmf.co.in , invescomutualfund.com

Links are also there in assignment documents

Individual assignments-

This all information would be available in the fact sheet.

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Session-5

N(N+3)/2= N + N + N(N-1)/2

Last term could be think as the covariance

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Eg CAPM Model-only one index

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E(ei)= 0 ; So expected could be made from above assumptions

Variance of constant is 0 ; So alpha term has been removed

Cov of ei with ej and ei with market is 0

What will happen if we have n number of stock?

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This will require less parameter but it could deviate from reality.

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For Small cap:- E(Ri)= Alphai + Betai * Rm= 6% + 1.4*12.5%

Var(Ri)= (1.4)2 (14.9%)2 + 0.65%

Cov(Small Cap, Value) = 1.4*0.8 * (14.9%)2

Single index model is not a portfolio optimization model. If you want to optimize, then go to Markowitz

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Session 6

Pharma Fench Model

Second Factor- SMB (Small minus Big)

Third Factor- HML

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Variable 1 – excess return is high. It is beta
Variable 2 - neg return suggest big company
Variable 3 - neg return suggest growth factor

Now use farma French model to get expected returns and find alpha

Benefit

Based on various factor, we will decide the investment strategy

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Session-7

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Behavioral Finance

Risk vs uncertainity= Risk we have probability but in uncertainity nothing is known

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Session-8

If misses then viva exam on video call

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Management of Equity

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