Investment Management
ISBN: 9788126569366
652 pages
eBook also available for institutional users
For more information write to us at: acadmktg@wiley.com
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