If there is any difference

in ranking is coming
(between Treynor and
Sharpe) that is owing to
differences in
diversification.
Rsi : 100-( 100/1+Rs)
— Therefore, these two
performance measures
provide complementary
yet different
information, and both
measures should be

rs: avg gain/avg loss

For calculating the next average
gains, multiply the previous
average gains by 13 and add
today’s gains if any and divide
the result by 14. In our previous
example, we will multiply the
average absolute gains of 9
days and add today’s absolute
gain (if any) and divide the result
by 14.
used as a leading indicator as it
normally tops and bottoms
ahead of the market, thereby
indicating an imminent correction
in the price of a security. It is
pertinent to note that the levels
of 70 and 30 needs to be
adjusted according to the
inherent volatility of the security
in question.

2. Failure Swings: This is also

called support and resistance
penetrations or breakouts.
Failure swings are indications of
impending market reversals.

Bearish failure swing

In this chart, the RSI touches the

70 mark, the threshold of
overbought zone then falls to 60.
This is called the fail point. Post
that, it moves again but rises
less than the previous high of
70, thereby, creating a failure
swing. It then falls below the fail
point there creating a bearish
failure swing. It acts as a signal
for the trader to go for a short
position in the security.
Divergence: Divergence results
when the price of a security and
the RSI behave differently. If the
security price is decreasing or
flat but RSI is increasing, it’s a
sign of divergence. Similarly,
when the security price is
increasing or flat by RSI is
falling, it’s a sign of divergence.
It is a strong indication of an
imminent market correction.

2. Support and Resistance: In

some situations, the RSI exhibits
support and resistance levels
with more clarity than the
security price itself.
For a poorly diversified portfolio
could have a
high ranking on the basis of the
Treynor
performance measure but a
much lower
ranking on the basis of the
Sharpe
performance measure.

Jensen
The Jensen's measure is the
difference in
how much a person / fund
returns vs. the
overall market.
— Jensen's measure is
commonly referred to
as alpha.
— When a manager outperforms
the market
concurrent to risk, they have
"delivered
alpha" to their clients.
Alpha α = R(i) – ((R(f) + β x
(R(m) - R(f)))
— where:
— R(i) = the realized return of
the portfolio or
investment
— R(m) = the realized return of
the appropriate
market index
— R(f) = the risk-free rate of
return for the time
period
— β = the beta of the portfolio of
investment with
respect to the chosen market
index

Therefore, the α represents how

much of
the rate of return on the portfolio
is
attributable to the manager’s
ability to
derive above-average returns
adjusted
for risk.
— Superior risk-adjusted returns
indicate
that the manager is good at
either
predicting market turns, or
selecting
undervalued issues for the
portfolio

First, it is easier to interpret in

that an
alpha value of 0.02 indicates that
the
manager generated a return of 2
percent per period more than
what
was expected given the
portfolio’s ris

Information Ratio
 To interpret IR, mean excess
return in the
numerator represents the
investor’s ability to
use his talent and information to
generate a
portfolio return that differs from
that of the
benchmark against which his
performance is
being measured (e.g., BSE 500
index).
• The denominator measures the
amount of
residual (unsystematic) risk that
the investor
incurred in pursuit of those
excess returns.

Tracking Error is a “cost” of

active
management in the sense that
fluctuations in the periodic ERj
values
represent random noise beyond
an
investor’s control that could hurt
performance.
• Thus, the IR can be viewed as
a benefit-
to-cost ratio

high IR can be achieved by

having a
high return in the portfolio, a
low return of
the index and a low tracking
error.
• A high ratio means a
manager can
achieve higher returns more
efficiently
than one with a low ratio by
taking on
additional risk.
• We use information ratio to
check
whether manager assumes
additional
risk or not.

Sortino
As Sortino ratio focuses only on
the negative
deviation of a portfolio’s returns
from the mean, it
provides a better view of a
portfolio’s risk-
adjusted performance since
positive volatility is a

Open ended funds can be

bought or sold
anytime, the closed ended funds
can be
bought only during their launch
(NFO) and
can be redeemed when the fund

NAV (Net Asset Value):

— It is the unit price of a mutual
fund
scheme; mutual funds are
bought or sold
on the basis of NAV.
— Unlike share prices which
changes
constantly during the trading
hours, the
NAV is determined on a daily
basis ( based
on closing price of all the
securities) the
mutual fund schemes own after
making
appropriate adjustments.
The expenses of a MF like fund
management; administration,
distribution
etc. are charged proportionately
against
the assets of the scheme and
are
adjusted in the scheme NAV.
— For instance, an amount of
Rs 1,000
crores mobilized (Rs.10 per unit)
in the
NFO is invested in various
securities as
per the scheme mandate.
— The market prices of these
securities
change on a daily basis.

Expense Ratio: It is the cost of

fund
management.
— Lower is the better
— R2 - Indicates that MF is well
diversified or
ill diversified wrt to the
benchmark.
— Higher is the better
Bonds
Long-term,
fixed
obligation
debt
securities
packaged
in
convenient,
affordable
denominati
ons for
sale.
Subordinat
ed (junior)
debentures
*
These
bonds
posses a
claim on
income
and assets
that are
subordinate
d to other
debentures;
These
bonds are
unusual in
corporate
sector, but
are popular
in municipal
bonds
segment.
They are
also known
as revenue
bonds.
Sovereigns:
The mkt for
govt
securities is
the largest
sector in
Japan; It
involves of
variety of
debt
instruments
issued to
meet the
needs of
this govt.
Quasi
Govts
(agencies)
and Foreign
Govts:
US$ and
Pound
Sterling
major
currencies
in
this market.
govt
agencies or
corporate
issues that
are backed
by cash
flow
securities
like
mortgages
or car
loans.
This is the
major
sector in
US and
fairly
strong in
Eurozone
countries.
Corporation
s:
A major
non-
government
al issuer of
debt is
the
corporation
s.
This market
consists of
industries,
public

Standard &
Poor’s
— Moody’s
— Fitch
Investor
Service
he first
Masala
bond was
issued in
2014 by
IFC for the
infrastructur
e projects
in India.

Yield to
Maturity
(YTM)
It is the
measure of
a bond’s
rate of
return
that
considers
both the
interest
income and
capital gain
or loss
YTM is
nothing but
Bond’s
internal rate
of
return
maturity 20
years; par
value
$1000
— Let us
assume
that YTM
(the
market’s
required
rate of
return on
the bond) is
10%, what
is the value
of this

Bonds
prices are
sensitive to
changes in
the interest
rates, and
they are
inversely
related to
the interest
rates.
— The
intensity of
the price
sensitivity
depends
upon a
bond’s
maturity
and the
interest
rate.
— The
bond’s
price
sensitivity
can be
estimated
by its
duration.
If YTM
increases
by 1%
(8.5%
Bond) will
leads to
3.87%
decrease in
the price
and vice
versa.
If YTM
increases
by 1%
(11.5%
Bond) will
leads
to 3.69%
decrease in
the price
and vice
versa

It is an
important
measure for
investors to
consider,
as bonds
with higher
durations
carry
more risk /
higher price
volatility
than bonds
with lower
durations