Investment Management

Rajiv Srivastava

ISBN: 9788126569366

652 pages

INR 679

Description

Investment Management has been primarily developed to meet the academic requirements of MBA and PGDBM students (specialising in Finance) as well as instructors. It would be equally useful for brokers and research analysts. The book focuses on Indian markets, conventions, and practices by the stock exchanges in India, examples and case studies from Indian environment and applications of concepts using Indian benchmarks. The purpose of the book is to offer a credible alternative to management students, using easy-to-comprehend text, cases, and screenshots from familiar economic environment. The distinguishing feature of the book is its focus on the Indian market.

Preface

 

1. Investment – Instruments and Markets

Introduction

Motives of Investment

Investment Assets

Financial Assets

Functions of Financial / Capital Markets

Classification of Markets

Over-the-Counter (OTC) Markets

Primary Market

Secondary Markets

Market for Government ­Securities

Treasury Bills

Secondary Markets for G-Sec

Money Markets

Call Money Market

Repo Market

Commercial Paper (CP)

Certificate of Deposit (CD)

FIMMDA

Investment Attributes

Introduction

Need for Portfolio and its Management

 

2. Securitisation and Index

Introduction

Securitisation

Introduction

Process of Securitisation

Benefits of Securitisation

Distinguishing Features of Securitisation

Brief History of Securitisation in India

Impediments in Developing Securitisation in India

Index

Introduction

Constructing Index

Uses of Indices

Impact Cost

Managing Changes in Index

Total Return Index

 

3. Time Value of Money

Introduction

Compensation for Waiting and Compensation for Risk

Future Value and Compounding

Present Value and Discounting

Future Value of Annuity

Present Value of Annuity

Effective Rate of Interest

Present Value of Growing Annuity

Present Value of Perpetuity

 

4. Return and Risk

Introduction

Return

Historical and Expected Return

Expected Return

Risk

Measuring Expected Return and Risk from Historical Data0

Expected Returns and Risk under Uncertainty

Normal Distribution

 

5. Portfolio Theory

Introduction

Portfolio Return

Portfolio Risk

Covariance

Two-Asset Portfolio

Risk Aversion and Iso-Utility Curve

The Optimum Portfolio

Capital Allocation Line

Capital Allocation Line and Iso-Utility Curves

Finding Optimal Capital Allocation Line

Finding the Efficient Frontier – The Markowitz Model

Understanding Diversification and Risk

 

6. Asset Pricing Models: ­Capital ­Asset Pricing Model and ­Arbitrage Pricing Theory

Introduction

Systematic and Unsystematic Risk

Asset Pricing and Risk

Assumptions of Capital Asset Pricing Model

Capital Market Line and Market Portfolio M

Pricing a Financial Asset – Capital Asset Pricing Model (CAPM)

Interpretation of Capm

Measuring Beta

Portfolio Theory and CAPM

Capital Market Line (CML) and Security Market Line (SML)

Limitations of CAPM

Sharpe’s Index Model of Optimisation

Arbitrage Pricing Theory

How APT Works

Process of Arbitrage

Diversification Under APT

Assumptions of CAPM and APT

Limitations of APT

 

7. Common Stock Valuation

Introduction

Balance Sheet Valuation Approach

Discounted Cash Flow Models

Relative Valuation

 

8. Economy, Industry and ­ Company (E-I-C) Framework to Investment

Introduction

Value Drivers

E-I-C Approach, CAPM, and APT

E-I-C Approach and Dividend Discount Models (DDMS)

Global Factors

Global Stability

Interest Rate Differentials

Credit Rating

Macroeconomic Analysis

Gross Domestic Product (GDP) and Growth Rate

Business Cycles

Inflation

Yield Curve

Fiscal Policy

Monetary Policy

Trade Policy

Exchange Rate, Balance of Payments, and Foreign Investment

Industry Analysis

Cost Structure and Capital Structure

Financing Norms

Payback Period

Industry Life Cycle

Entry and Exit Barriers

Regulatory Environment

Company Analysis

Historical Analysis

Quality of Management

Opinion of Other Stakeholders

Competitive Position of the Firm

Corporate Governance Standards

Financial Analysis

The PE Ratio

 

9. Financial Analysis

Introduction

Balance Sheet

Shareholders’ Funds

Loans

Current Liabilities and Provisions

Assets

Profit and Loss Account or Income Statement

Few Concepts for P & L Account

Cash Flow Statement

Analysing Financial Statements − Ratio Analysis

Objectives of Financial Analysis

Capital Structure Ratios

Liquidity Ratios

Profitability Ratios

Working Capital/Turnover Ratios

Valuation Ratios

Ways to Use Ratios

Du Pont Analysis

Common Size Statement

 

10. Efficient Market Hypothesis

Introduction

Structural Efficiency of Markets

Informational Efficiency of Markets

Forms of Market Efficiency

Weak Form of Efficient Markets

Semi-Strong Form of Efficient Markets

Strong Form of Efficient Markets

EMH and Technical Analysis

EMH and Fundamental Analysis

EMH and Portfolio Management

EMH and Portfolio Manager

EMH and Investors

 

11. Behavioural Finance

Introduction

St Petersburg Paradox; Utility of Money

Prospect Theory

Mental Accounting

Anchoring

Confirmation Bias

Hindsight Bias

Overconfidence

Gambler’s Fallacy

Herd Behaviour

Behavioural Portfolios

 

12. Technical Analysis

Introduction

Dimensions of Technical Analysis

Dow Theory

Fibonacci Numbers / Series

Volume

Breadth

Supports and Resistances

Moving Averages

Oscillators

Patterns

Final Word

 

13. Fixed Income Securities

Introduction

Features of Fixed Income Securities

Types of Bonds

Government Securities

Types of Government Securities

Method of Issuance

Treasury Bills

Bonds

Pricing of Bond

Yield on the Bond

Term Structure of Interest Rates; Yield Curve

Issue with YTM

The Yield Curve

Expectations of Interest Rates and Implied Forward Rates

Theories of Term Structure

 

14. Managing Fixed Income Securities

Introduction

Risks in Fixed Income Securities/Bonds

Measurement and Management of Default Risk

Bond Rating

Measurement and Management of Interest Rate Risk

Properties of Duration and Portfolio Management

Bond Management Strategies

 

15. Futures

Introduction

Futures Contract on Indices and Individual Stocks

Long and Short Position

Pricing Stock and Index Futures

Basis, Convergence, and Basis Risk

The Arbitrage Argument

Hedging through Index Futures

Covering Market Risk of Stocks

Speculation with Stock Index Futures

Arbitrage with Stock Index Futures

Other Applications of Index Futures

 

16. Options

Introduction

Terminology of Options

Payoff of Call Option

Payoff of Put Option

More on Terminology

Understanding Options Quotations

Option Valuation

Black Scholes Model

Hedging with Options

Trading with Options

 

17. Mutual Fund Investment

Introduction

Concept of Mutual Fund

Structure of Mutual Fund

Regulation of Mutual Fund

Returns and Taxation

Types of Mutual Funds

Exchange-Traded Funds

Index Fund

Tracking Error

Advantages of Investing in Mutual Funds

Limitations of Investing in Mutual Funds

Performance Evaluation of Mutual Funds

 

18. International Investing

Introduction

Correlation Among World’s Capital Markets

The Efficient Frontier

Systematic Risk for Global and Local Portfolios

Motivations for International Investing

Exchange Rate Risk

Special Risks in International Investment

Managing Exchange Rate Risk

Incorporating Risks in Expected Returns

Diversifying Globally

 

19. Portfolio Construction, Revision, and Performance Measurement

Introduction

Objectives of Portfolio

Portfolio Construction

Asset Allocation

Portfolio Revision

Reasons for Portfolio Rebalancing

Formula Plans

Portfolio Performance Measurement

Measures of Return

Measures of Risk

Performance Measures

 

Summary

Solved Problems

Review Questions

Critical Thinking Questions

Practical Projects

Exercises

Case Study – Unique Consultant Part XIII

Index