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A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 1
1.1 INTRODUCTION TO THE TOPIC
Portfolio management concerns the constructions and maintenance of a collection
of investment. It is investment of funds in different securities in which the total risk of
the portfolio is minimized, while expecting maximum return from it. It primarily
involves reducing risk rather than increasing return. Return is obviously important
though, and the ultimate objective of portfolio manager is to achieve a chosen level of
return by incurring the least possible risk.
RISK
Risk is the quantifiable likelihood of loss or less than expected returns. Risk includes
the possibility of losing some or all of the original investment. Risk is usually
measured using the historical returns or average returns for a specific investment.
Uncertainty about the future benefits to be realized from an investment. Thus, risk can
be defined as “the measurable possibility of loss on an investment”. There is risk
involved if the outcome of an investment is uncertain at the time the investment is
made. Although the outcome is uncertain, it is measurable.
Risk and return are the primary ingredients in making investment choices.
Expected risk must be compared to risk. As risk increases so must the return to
compensate for the greater uncertainty. This is called the Risk Return Trade-off.
Namely, that there is greater risk in investment classes that offer potential of higher
returns and vice-versa. Therefore, an investor has to choose between higher returns
with higher risk versus lower risk accompanied by lower returns. The risk/return trade
off is crucial. A new business may involve a lot of risk, but may offer higher return.
On the other hand, government securities have minimum risk, so a low return is
enough.
Risk creates potential higher return. The investor should seek the highest possible
return at the risk level they are willing to accept. As an investor, we need to evaluate
each investment separately, comparing expected returns with the risks. In general
Risk is defined as the chance that an investment's actual return will be different than
expected. This includes the possibility of losing some or all of the original investment.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 2
1.2 INTRODUCTION TO THE TOPIC PORTFOLIO
MANAGEMENT
Investing in securities such as shares, debentures, and bonds is profitable as well
as exciting. It is indeed rewarding, but involves a great deal of risk and calls for
scientific knowledge as well artistic skill. In such investments both rationale and
emotional responses are involved. Investing in financial securities is now considered
to be one of the best avenues for investing one savings while it is acknowledged to be
one of the most risky avenues of investment.
“It is rare to find investors investing their entire savings in a single security.
Instead, they tend to invest in a group of securities. Such a group of securities is called
portfolio”. Creation of a portfolio helps to reduce risk, without sacrificing returns.
Portfolio management deals with the analysis of individual securities as well as with
the theory and practice of optimally combining securities into portfolios. An investor
who understands the fundamental principles and analytical aspects of portfolio
management has a better chance of success.
Portfolio means bundle of things investors tend to invest in a group of securities or
different investment avenues such as group of securities or bunch of Investment
Avenue is called portfolio. Portfolio management is the managing the portfolio in
efficient manner which serves maximum returns, minimum risk and hedge against the
risk.
Portfolio management objectives can be stated as: -
• Risk minimization.
• Safeguarding capital.
• Capital Appreciation.
• Choosing optimal mix of securities.
• Keeping track on performance.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 3
1.3 STATEMENT OF PROBLEM
With a plethora of schemes to choose from, the investor faces several
problems in selecting a portfolio. One of the main reasons associated with that is the
risk. Factors such as investment strategy and management style are qualitative, but the
fund’s past record is an important indicator too. Though past performance alone
cannot be indicative of future performance, it is frankly, the only quantitative way to
judge how well is a fund at present.
Though this study I’m conducting a research to identify the risk perception
and portfolio of equity investors.
1.4 OBJECTIVES OF THE STUDY
Primary Objective
The main objective of the study is “to find out the risk perceptions and
portfolio of equity investors in Edelweiss Financial Advisors Ltd”
• To find out the risk perception of equity investors in Edelweiss Financial
Advisors Ltd.
• To bring out the importance of portfolio management of equity investors.
Secondary Objective
• To give recommendations to Equity investors on Portfolio Management.
• To know about the Investors knowledge and experience of investing in equities.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 4
1.5 SCOPE OF THE STUDY
The study covers about the risk perception and Portfolio management of
equity investors in Edelweiss Financial Advisory Ltd in order to obtain a better
insight in to the company’s profitability and performance. With this study, the
researcher can bring about a clear picture about the Risk perception and Portfolio
management of Equity investors in Edelweiss Financial Advisory Ltd. The researcher
will also be in a position to state the understanding of customer/ investors about the
equities. It also helps to know the portfolio management of equity investors, and can
also suggest the ways through which investors can increase / maximize his return with
low risk.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 5
1.6 RESEARCH METHODOLOGY
INTRODUCTION:
An appropriate method of research is behind the success of any survey. It
provides a scientific framework of plan conduction research investigation. Research
methodology is the way to systematically solve the research problem. The role of
research related to business or to the economy as a whole has greatly increased in
modern times. The increasingly complex nature of business and government has
focused attention on the use of research in solving of operational problems. Operation
research and market research along with multinational research are considered crucial
and their assists managers of any organization in more than one way in taking
decisions. The research process which works upon is as shown in the figure below
RESEARCH
Research is a systematic method of finding solutions to problems. It is a
search for knowledge. The systematic approach relating to generalization and
formulation of theories is called research. The adoption of a proper methodology is an
essential step in conducting survey research study. Research can be defined as
“systematic and purposive investigation of facts with an object of determining cause
and effect relationship among such facts and relationship between two or more
phenomena”.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 6
FIELD OF STUDY
The study has been conducted at Edelweiss Financial Advisory Ltd
Thrissur; the study seeks to find out the Risk perception and portfolio management of
equity investors in Edelweiss.
RESEARCH DESIGN
A research design is the arrangement of conditions for collection
and analysis of data in manner that aims to combine relevance to the research purpose
with economy in procedure. It is a comprehensive plan of the series of operation that a
researcher intends to carry out to accomplish the research objectives. It is a blue print
of study. The research design used in this study is descriptive design. It aims at
gaining the overall knowledge about the organization.
DESCRIPTIVE RESEARCH DESIGN
Descriptive research design includes surveys and fact-finding, enquiries of
different kinds. The major purpose of descriptive research is description of the state of
affairs, as it exists at present. In social science and business research, we quite often
use the term ex post facto research for descriptive research studies. The main
characteristics of this method are that the researcher has not control over the variable;
he can only report what has happened or what is happening. Most ex post facto
research projects are used for descriptive studies in which the researcher seeks to
measure such items, for example, frequency of shopping, and preference of the people
over similar item.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 7
SAMPLING METHOD
It is neither feasible nor desirable to cover the entire population, thus
sampling was done. The sample is the representative unit of the entire population.
Sampling remains the only way when population contents infinitely many members.
The researcher has taken samples for this research and proportionate sampling method
is used for choosing the sample size. Here the researcher has taken Simple random
Sampling.
SAMPLE SIZE
The sample size for the study is 100.
DATA COLLECTION METHOD
The task of collecting data begins after a research problem has been defined
and plan is chalked out for this study data is collected from primary and secondary
sources.
• Primary data
Primary data are collected directly from the field using interview with
questionnaire
• Secondary data
Secondary are collected from various books, publications, reports from the
company and from the company’s website
TOOLS USED FOR DATA ANALYSIS:
CHI-SQUARE TEST
Chi-Square test is the statistical test which in which the statistic follows a χ²
distribution, is called the χ²test. Therefore χ² is a statistical test, which tests the
significance of difference between observed frequencies and the corresponding
theoretical frequencies of a distribution, without any assumption about the distribution
of the population. χ² test is the one of the simplest and most widely used non-
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 8
parametric tests in statistical work. This test was developed by Prof. karl Pearson in
1990.
Period of the study
The study was conducted for a period of 45 days from 9th April 2012 to 23rd May
2012.
SOURCES OF DATA
The data sources are:
• Offer documents
• Company’s records
• Company’s publications
• Annual repots
• Journals
• Websites
1.7 LIMITATIONS OF THE STUDY
• The study was conducted for a period of 45days which is major limitation of
the study.
• Since the findings are mostly based on the information given by the
participants, there is every possibility of lacking precision for the findings of
the study.
• Though assured of confidentiality, still some of the respondents hesitated to
answer freely and firmly.
• Since the attitude of the respondent is bound to change from time to time, the
result of the study may not be universal
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 9
2.1 REVIEW OF LITERATURE
Risk Management
Salvatore (2001: 573) describes risk as follows:
Risk refers to a situation in which there is more than one possible outcome
to a decision, and the probability of each specific outcome is known or can be
estimated. Thus, risk requires that the decision maker know all the possible outcomes
of the decision and have some idea of the probability of each outcome’s occurrence.
Investing in a stock can lead to one of a set of possible outcomes, and the probability
of each possible outcome can be estimated from past experience or from market
studies. In general, the greater the number and range of possible outcomes, the greater
is the risk associated with the decision or action.
Risk could be defined as the probability that the expected return from the
security will not materialize. Every investment involves uncertainties that make future
investment returns risk-prone. Uncertainties could be due to the political, economic
and industry factors. Risk could be systematic in future depending upon its source.
Systematic risk is for the market as a whole, while unsystematic risk is specific to an
industry or the company individually.
In this section, the literature review including three parts. First, behavior
finance perspective of individual investor. Second, individual investor’s risk
perception, risk tolerance and portfolio choice. Third, individual investor’s socio-
economic status differential and risk tolerance. The results for gender, education level
and income level are consistent with the earlier literature. Previous literature
indicating those factors on risk-taking and risk tolerance are gender, age, marital
status, occupation, income level, education level and economic environments
expectations, which might influence an individual investor’s level of risk taking, but
the factor of education level might not. Those studies are classified by three
catalogers.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 10
� Behavior Finance Perspective of Individual Investor
As a result of traditional finance theory appears to play a limited role in
understanding this issues such as (1) why do individual investors trade, (2) how do
they perform the task, (3) how do they choose their portfolios to conform their
conditions, and (4) why do returns vary so quickly even across stocks for reasons
other than risk. In the new arena of behavior finance or so called behavior economic,
we could to interpret about individual investors behave in their invest choice more
completely. Most of behavioral finance researchers often claimed that the reality
results presents no unified theory unlike traditional finance theory appears expected
utility investigation issues of behavioral finance research.
“Maximizations using rational beliefs” Its means those scholars in this field
actually postulate whole investors in financial market are rationales; they can’t
influenced through any factors only maximum profit for themselves. Most authors
show behavior finance perspective on individual investor, such as Deaux and
Emswiller (1974), Lenney (1977), Maital et al. (1986), Thaler and Johnson (1990) and
Beyer and Bowden (1997). Those authors are to exclaim that individual investor
would demonstrate different risk attitude when facing investment alternatives. Later
instruction in our research, we called risk perception and risk tolerance of individual
investor. Comparing with previously research, current study is to focus on external
factors and psychological factors how to affect investor’s investment decision and
portfolio choice. For instance, Annaert et al. (2005), Wang et al. (2006) indicate the
impact of information asymmetric problem on investor behave, this is another subject
in behavioral finance field. Most of these researches are pay close attention to
behavioral finance, especially in financial products choices (investment) and behave
of individual investor invest related.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 11
� Risk Perception, Risk Tolerance and Portfolio Choice
Financial risk tolerance is defined as the maximum amount of uncertainty that
someone is willing to accept when making a financial decision. Although the
importance of assessing financial risk tolerance is well documented, in practice the
assessment process tends to be very difficult due to the subjective nature of risk taking
(the risk of investor willing to reveal their risk tolerance) and objective factors such as
Grable and Joo (1997), Grable and Lytton (1999), and Grable (2000).
Risk tolerance represents one person’s attitude towards taking risk. This
indicated is an important concept that has implications for both financial service
providers (asset management institution or other financial planner) and consumers
(investors). For the latter, risk tolerance is one factor which may determine the
appropriate composition of many assets in a portfolio which is optimal and satisfied
investors invest preference in terms of risk and return relative to the needs of the
individual investors Droms, (1987), Hallahan et al., (2004).
There are some empirical evidence showing the impact of risk perception; risk
tolerance and socio-economic on portfolio choice, for instance, Carducci and Wong
(1998), Grable and Joo (1997), Grable and Lytton (1999), Grable (2000), Hallahan et
al., (2003), Hallahan et al., (2004), Frijns et al., (2008), and Veld and Veld-
Merkoulova (2008). In terms of different risk perception or risk tolerance level,
individual investor may show different reaction base upon their psychology factor and
economic situation, which would lead to heterogeneous portfolio choice for individual
investors. For this reason, it is crucial to recognize and attitudinal how individual
investors with different risk perceptions and risk tolerance make their invest products
choice on
Investment plan, in particular socioeconomic status differentials may make their
choice vary and difference.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 12
� Investor’s Socio-Economic Status and Risk Tolerance
Some researchers have indicated that the validity of widely used
demographics as determinants of risk tolerance is noteworthy as the relationship
between socio-economic status differences including gender, age, income level, net
assets, marital status, educational level and investment decision or portfolio choice.
With regard to the financial risk tolerance literatures, there is much interest in the
demographic determinants and risk attention (involving three risk types: risk aversion,
risk moderate and risk seeking) is particularly focused on age, gender, education
level, income level, marital status, the number of dependents and net assets.
Specifically, although debate remains on some issues, a range of common findings are
generally observed. There are five phenomenons in socio-economic status variables
differential and portfolio choice as the following: First, risk tolerance decreases with
age (e.g., Morin and Suarez 1983; Roszkowski, Snelbecker, and Leimberg 1993).
Second, females have a lower preference for risk than males (e.g., Roszkowski,
Snelbecker, and Leimberg 1993; Grable 2000). Third, risk tolerance increases with
education level (e.g., Roszkowski, Snelbecker, and Leimberg 1993). Second, females
have a lower preference for risk than males (e.g., Roszkowski, Snelbecker, and
Leimberg 1993; Grable 2000). Third, risk tolerance increases with education level
(e.g., Roszkowski, Snelbecker, and Leimberg 1993; Haliassos and Bertaut 1995).
Fourth, risk tolerance increases with income level and net assets (e.g., Cohn et al.
1975; Roszkowski, Snelbecker, and Leimberg 1993; Bernheim, Skinner, and
Weinberg 2001). Fifth, single (i.e., unmarried) investors are more risk tolerant than
married (e.g., Roszkowski, Snelbecker, and Leimberg 1993).
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 13
� A study in portfolio management by Magnus Edvald Bjorn son on April 20th
1998
All portfolios that lie on the same indifference curve are equally desirable
to the investor (even though they have different expected returns and variance.) An
obvious implication is that indifference curves do not intersect.
An investor will find any portfolio that is lying on an indifference curve
that is "further northwest" to be more desirable than any portfolio lying on an
indifference curve that is "not as far northwest."
Generally it is assumed that investors are risk averse, which means that the
investor will choose the portfolio with the smaller variance given the same return.
Risk Averse investors will not want to take fair gambles (where the expected payoff is
zero). These two assumptions of no satiation and risk aversion cause indifference
curves to be positively sloped.
� Portfolio management theory by Dr Sam vaknin
S.NO STATE OF INVESTORS DESCRIPTION PROPERTY
1. Diminishing
Avoidance of absolute
risk
Invests more in risky
assets as his capital
grows
Derivative of
avoidance of
absolute risk < Æ
2. Constant Avoidance of
absolute risk
Doesn't change his
investment in risky
assets as capital
grows
Derivative = Æ
3. Increasing Avoidance
of absolute risk
Invests less in risky
assets as his capital
grows
Derivative > Æ
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 14
4. Diminishing
Avoidance of relative
risk
Percentage invested
in risky assets grows
with capital growth
Derivative < Æ
5. Constant Avoidance of
relative risk
Percentage invested
in risky assets
unchanged as capital
grows
Derivative = Æ
6. Increasing avoidance
of relative risk
Percentage invested
in risky assets
decreases with capital
growth
Derivative > Æ
2.2 Risk
People have many motives for investing.fro most investors, however, their interest in
investment is largely pecuniary-to earn a return on their money. Investors not only
like return but they dislike risk. Faerber defined risk as “the variability of returns from
an investment or the uncertainty related to the outcome of an investment.” There are
many different types of risk. Risk is the “degree of uncertainty of return on an asset”
(Morgenson & Harvey, 2002, p. 284).
Types of Risk
Reference was made to two types of risk of investor.
1) Systematic Risk
2) Unsystematic Risk.
Systematic Risk
The systematic risk affects the entire market. Often we read in the news paper teat
stock market is in the bear hug or in the bull grip. This indicates that the entire market
is moving in a particular direction either downward or upward. The economic
conditions, political conditions and the sociological changes affect the security
market. The recession in the economy affects the profit prospects of the industry and
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 15
the stock market. The 1998 recession experienced by developed and developing
countries have affected the stock markets worldwide. The south East Asian crisis has
affected the stock market worldwide. These factors are beyond the control of the
corporate and the investor.
• Market risk
• Interest rate risk
• Purchasing power risk
Market risk:
Jack Clark Francis has defined market risk as that portion of total
variability of return caused by the alternating forces of bull and bear markets. When
the security index moves upward haltingly for a significant period of time, it is known
as bull market. In bull market, the index moves from a low level to the peak. Bear
market is just a reverse to the bull market; the index declines haltingly from the peak
to a market low point called trough for a significant period of time.
Market risk is caused by investor reaction to tangible as well as intangible
events. This arises out of changes in demand and supply pressure in the markets,
following the changing flow of information or expectations. The totality of investor
perception and subjective factors influence the events in the market which are
unpredictable and give risk to risk, which is not controllable.
Interest rate risk:
Interest rate risk is the variation in the single period rate of return caused
by the fluctuations in the market interest rate. Most commonly interest rate risk
affects the price of bonds, debentures and stocks. The fluctuations in the interest rates
are caused by the changes in the government monetary policy and the changes that
occur in the interest rates of treasury bills and the government bonds.
The root cause of interest rate lies in the fact that, as the rate of interest
paid on US government securities rises or falls, the rate of return demanded on
alternative investment vehicles, such as stocks and bonds issued in the private sector,
rise or fall.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 16
Purchasing power risk:
Variations in the returns are caused also by the loss of purchasing power
of currency. Inflation is the reason behind the loss of purchasing power. The level of
inflation proceeds faster than the increase in capital value. It is the probable loss in the
purchasing power of the returns to be received. Hence inflation or rise in prices lead
to raise cost of production, lower margins, wage rises and profit squeezing etc. the
return expected by investors will change due to change in real value of returns. Cost
push inflation is caused by rise in the costs, due to wage rise or rise in input prices.
The increase in demand may be caused by changing expectation of future interest
rates and inflation due to increase in money supply or creation of currency to finance
the deficits of the government. This element of purchasing power risk is inherent in
all investments and cannot be controlled by him.
Unsystematic Risk
Unsystematic Risk is unique and peculiar to a firm or an industry. It
stems from managerial inefficiency, technological change in the production process,
availability of raw material changes in the consumer preference, and labor problems.
The nature and magnitude of the above mentioned factors differ from industry to
industry, and company to company. They have to be analyzed separately for each
industry and firm. The changes in the consumer preference affect the consumer
products like television sets, washing machines, refrigerators, etc. more than they
affect the iron and steel industry. Financial leverage of the companies that is debt-
equity portion of the companies differs from each other. The nature and mode of
raising finance and paying back the loans, involve a risk element. All these factors
from the unsystematic risk and contribute a portion in the total variability o the return.
It is divided in to two
• Business risk
• Financial risk
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 17
Business risk:
Business risk is that portion of the unsystematic risk caused by the
operating environment of the Business. It arises from the liability of a firm to
maintain its competitive edge and the growth or stability of the earnings. Variation
that occurs in the operating environment is reflected on the operating income and
expected dividends. The variations in the expected operating income indicate the
business risks. It relates to variability of the business, sales, income, profits etc. it is
sometimes external to the company due to changes in government policy or strategies
of competitors or unforeseen market conditions. They may be internal due to fall in
production, labor problems, raw material problems etc. it leads to fall in revenues and
in profit of the company, but can be corrected by certain changes in the company’s
policies.
Financial risk:
It refers to the variability of the income to the equity capital due to the debt
capital. Financial risk in a company is associated with the capital structure of the
company. Capital structure of the company consists of equity funds and borrowed
funds. The presence of debt and preference capital results in a commitment of paying
interest or pre fixed rate of dividend. The residual income alone would be available to
the equity holders. If the company runs into losses or reduced profits, these may lead
to fall in returns to investors or negative returns. Proper financial planning and other
financial adjustments can be used to correct this risk and as such it is controllable.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 18
RISK –RETURN MATRIX OF EQUITY
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 19
2.3 Portfolio Management
An investor considering investment in securities is faced with the problem of
choosing from among a large number of securities and how to allocate his funds over
this group of securities. Again he is faced with problem of deciding which securities
to hold and how much to invest in each. The risk and return characteristics of
portfolios. The investor tries to choose the optimal portfolio taking into consideration
the risk return characteristics of all possible portfolios. As the risk return
characteristics of individual securities as well as portfolios also change. This calls for
periodic review and revision of investment portfolios of investors. An investor invests
his funds in a portfolio expecting to get good returns consistent with the risk that he
has to bear. The return realized from the portfolio has to be measured and the
performance of the portfolio has to be evaluated. It is evident that rational investment
activity involves creation of an investment portfolio. Portfolio management comprises
all the processes involved in the creation and maintenance of an investment portfolio.
It deals specifically with the security analysis, portfolio analysis, portfolio selection,
portfolio revision & portfolio evaluation. Portfolio management makes use of
analytical techniques of analysis and conceptual theories regarding rational allocation
of funds. Portfolio management is a complex process which tries to make investment
activity more rewarding and less risky.
Portfolio Analysis
Portfolio analysis is a systematic way to analyze the products and services that make
up an association's business portfolio. All associations (except the simplest and the
smallest) are involved in more than one business. Some of these include publishing,
meetings and conventions, education and training, government representation,
research, standards setting, public relations, etc. Each of these is one of the
association's strategic business units (SBUs). Each business consists of a portfolio of
products and services. For example, an association's publishing business might
include a professional journal, a lay magazine, specialized newsletters geared to
different member segments, CDs, a website, social networking sites, etc.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 20
Portfolio analysis helps you decide which of these products and services should be
emphasized and which should be phased out, based on objective criteria. Portfolio
analysis consists of subjecting each of the association's products and services through
a progression of finer screens. During a time of cutbacks and scarce resources, it is
essential to screen out programs and services that are not essential to most members.
Those that appeal to a more limited segment can be funded by those desiring the
product or service rather than by dues.
Analysis of securities in the combined form is portfolio analysis. Group of
securities when held together behave in a different manner and give interest and
dividend also which are different to the analysis of individual securities.
� When diversification does not help
Positively correlated return of two securities will not provide risk
reducing but only risk averaging.
Rb
Ra
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 21
� When diversification can eliminate risk
Perfectly negatively correlated
Rb
Ra
� Insurance principle
Diversification provide substantial risk reduction if the components of
a portfolio are uncorrelated
Rb
Ra
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 22
Selection of Portfolio
The selection of portfolio depends upon the objectives of the investor. The selection
of portfolio under different objectives is dealt subsequently.
Objectives and asset mix
If the main objective is getting adequate amount of current income, sixty
percent of the investment is made in debt instruments and remaining in equity.
Proportion varies according to individual preference.
Growth of income and asset mix
Here the investor requires a certain percentage of growth as the income from
the capital he has invested. The proportion of equity varies from 60 to 100 % and that
of debt from 0 to 40 %. The debt may be included to minimize risk and to get tax
exemption.
Capital appreciation and Asset Mix
It means that value of the investment made increases over the year. Investment
in real estate can give faster capital appreciation but the problem is of liquidity. In the
capital market, the value of the shares is much higher than the original issue price.
Safety of principle and asset mix
Usually, the risk adverse investors are very particular about the stability of
principal. Generally old people are more sensitive towards safety.
Risk and return analysis
The traditional approach of portfolio building has some basic assumptions. An
investor wants higher returns at the lower risk. But the rule of the game is that more
risk, more return. So while making a portfolio the investor must judge the risk taking
capability and the returns desired.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 23
Diversification
Once the asset mix is determined and risk – return relationship is analyzed the
next step is to diversify the portfolio. The main advantage of diversification is that the
unsystematic risk is minimized.
Optimal Portfolio
The optimal portfolio concept falls under the modern portfolio theory. The
theory assumes (among other things) that investors fanatically try to minimize risk
while striving for the highest return possible. The theory states that investors will act
rationally, always making decisions aimed at maximizing their return for their
acceptable level of risk. The optimal portfolio was used in 1952 by Harry Markowitz,
and it shows us that it is possible for different portfolios to have varying levels of risk
and return. Each investor must decide how much risk they can handle and then
allocate (or diversify) their portfolio according to this decision.
The chart below illustrates how the optimal portfolio works. The optimal-
risk portfolio is usually determined to be somewhere in the middle of the curve
because as you go higher up the curve, you take on proportionately more risk for a
lower incremental return. On the other end, low risk/low return portfolios are
pointless because you can achieve a similar return by investing in risk free assets like
government securities.
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The investor can choose how much volatility that he is willing to bear in his portfolio
by picking any other point that falls on the efficient frontier. This will give the
investor the maximum return for the amount of risk he had wished to accept.
Optimizing the portfolio is not something we can calculate in our head. There are
computer programs that are dedicated to determining optimal portfolios by estimating
hundreds (and sometimes thousands) of different expected returns for each given
amount of risk.
Portfolio investment process
The ultimate aim of the portfolio manager is to reduce the risk and increase
the return to the investor in order to reach the investment objectives of an investor.
The manager must be aware of the investment process. The process of portfolio
management involves many logical steps like portfolio planning, portfolio
implementation and monitoring. The portfolio investment process applies to different
situation. Portfolio is owned by different individuals and organizations with different
requirements. Investors should buy when prices are very low and sell when prices rise
to levels higher that their normal fluctuation.
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Portfolio investment process is an important step to meet the needs and convenience
of investors. The portfolio investment process involves the following steps:
1. Planning of portfolio
2. Implementation of portfolio plan.
3. Monitoring the performance of portfolio.
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1) Planning of portfolio:
Planning is the most important element in a proper portfolio management.
The success of the portfolio management will depend upon the careful planning.
While making the plan, due consideration will be given to the investor’s financial
capability and current capital market situation. After taking into consideration a set of
investment and speculative policies will be prepared in the written form. It is called as
statement of investment policy. The document must contain (1) The portfolio
objective (2) Applicable strategies (3) Investment and speculative constraints. The
planning document must clearly define the asset allocation. It means an optimal
combination of various assets in an efficient market. The portfolio manager must keep
in mind about the difference between basic pure investment portfolio and actual
portfolio returns. The statement of investment policy may contain these elements. The
portfolio planning comprises the following situation for its better performance:
(A) Investor Conditions: -
The first question which must be answered is this – “What is the purpose of
the security portfolio?” While this question might seem obvious, it is too often
overlooked, giving way instead to the excitement of selecting the securities which are
to be held. Understanding the purpose for trading in financial securities will help to:
(1) define the expected portfolio liquidation, (2) aid in determining an acceptable
level or risk, and (3) indicate whether future consumption (liability needs) are to be
paid in nominal or real money, etc. For example: a 60 year old woman with small to
moderate saving probably (1) has a short investment horizon, (2) can accept little
investment risk, and (3) needs protection against short term inflation. In contrast, a
young couple investing couple investing for retirement in 30 years has (1) a very long
investment horizon, (2) an ability to accept moderate to large investment risk because
they can diversify over time, and (3) a need for protection against long-term inflation.
This suggests that the 60 year old woman should invest solely in low-default risk
money market securities. The young couple could invest in many other asset classes
for diversification and accept greater investment risks. In short, knowing the eventual
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purpose of the portfolio investment makes it possible to begin sketching out
appropriate investment / speculative policies.
(B) Market Condition: -
The portfolio owner must know the latest developments in the market. He
may be in a position to assess the potential of future return on various capital market
instruments. The investors’ expectation may be two types, long term expectations and
short term expectations. The most important investment decision in portfolio
construction is asset allocation. Asset allocation means the investment in different
financial instruments at a percentage in portfolio. Some investment strategies are
static. The portfolio requires changes according to investor’s needs and knowledge. A
continues changes in portfolio leads to higher operating cost. Generally the potential
volatility of equity and debt market is 2 to 3 years. The type of rebalancing strategy
focuses on the level of prices of a given financial asset.
(C) Speculative Policies: -
The portfolio owner may accept the speculative strategies in order to reach
his goals of earning to maximum extant. If no speculative strategies are used the
management of the portfolio is relatively easy. Speculative strategies may be
categorized as asset allocation timing decision or security selection decision. Small
investors can do by purchasing mutual funds which are indexed to a stock.
Organization with large capital can employ investment management firms to make
their speculative trading decisions.
(D) Strategic Asset Allocation: -
The most important investment decision which the owner of a portfolio must
make is the portfolio’s asset allocation. Asset allocation refers to the percentage
invested in various security classes. Security classes are simply the type of securities:
(1) Money Market Investment, (2) Fixed Income obligations; (3) Equity Shares, (4)
Real Estate Investment, (5) International securities.
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Strategic asset allocation represents the asset allocation which would be optimal for
the investor if all security prices trade at their long-term equilibrium values that is, if
the markets are efficiency priced.
2) Implementation of portfolio plan
In the implementation stage, three decisions to be made, if the percentage
holdings of various assets classes are currently different from the desired holdings as
in the SIP, the portfolio should be rebalances to the desired SAA (Strategic Asset
Allocation). If the statement of investment policy requires a pure investment strategy,
this is the only thing, which is done in the implementation stage. However, many
portfolio owners engage in speculative transaction in the belief that such transactions
will generate excess risk-adjusted returns. Such speculative transactions are usually
classified as “timing” or “selection” decisions. Timing decisions over or under weight
various assets classes, industries, or economic sectors from the strategic asset
allocation. Such timing decision deal with securities within a given asset class,
industry group, or economic sector and attempt to determine which securities should
be over or under-weighted.
(A) Tactical Asset Allocation: -
If one believes that the price levels of certain asset classes, industry, or
economic sectors are temporarily too high or too low, actual portfolio holdings should
depart from the asset mix called for in the strategic asset allocation. Such timing
decision is preferred to as tactical asset allocation. As noted, TAA decisions could be
made across aggregate asset classes, industry classifications (steel, food), or various
broad economic sectors (basic manufacturing, interest-sensitive, consumer durables).
Traditionally, most tactical assets allocation has involved timing across
aggregate asset classes. For example, if equity prices are believes to be too high, one
would reduce the portfolio’s equity allocation and increase allocation to, say, risk-free
securities. If one is indeed successful at tactical asset allocation, the abnormal returns,
which would be earned, are certainly entering.
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(B) Security Selection: -
The second type of active speculation involves the selection of securities
within a given assets class, industry, or economic sector. The strategic asset allocation
policy would call for broad diversification through an indexed holding of virtually all
securities in the asset in the class. For example, if the total market value of a company
share currently represents 1% of all of its issued equity capital, than 1% of the
investor’s portfolio allocated to equity would be held in company’s shares. The only
reason to overweight or underweight particular securities in the strategic asset
allocation would be to offset risks the investors’ faces in other assets and liabilities
outside the marketable security portfolio. Security selection, however actively
overweight and underweight holding of particular securities in the belief that they are
temporarily mispriced.
(3) Monitoring the performance of portfolio
Portfolio monitoring is a continuous and ongoing assessment of present
portfolio and the portfolio manger shall incorporate the latest development which
occurred in capital market. The portfolio manager should take into consideration of
investor’s preferences, capital market condition and expectations. Monitoring the
portfolio is up-grading activity in asset composition to take the advantage of
economic, industry and market conditions. The market conditions are depending upon
the Government policy. Any change in Government policy would reflect the stock
market, which in turn affects the portfolio. The continued revision of a portfolio
depends upon the following factors:
1. Change in Government policy.
2. Shifting from one industry to other
3. Shifting from one company scrip to company scrip.
4. Shifting from one financial instrument to another.
5. The half yearly / yearly results of the corporate sector.
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Risk reduction is an important factor in portfolio. It will be achieved by a
diversification of the portfolio, changes in market prices may have necessitated in
asset composition. The composition has to be changed to maximize the returns to
reach the goals of investor.
A. “The Portfolio Management Process and the Investment Policy Statement”
The investors should be able to
a. Justify the importance of the portfolio perspective;
b. Formulate the steps of the portfolio management process
c. Compare and contrast the types of investment objectives;
d. Contrast the types of investment constraints;
e. Justify the central role of the investment policy statement in the portfolio
management process;
f. Review the elements of an investment policy statement and distinguish
among the components within 1) the risk objective, 2) the return objective,
and 3) the time horizon constraint;
g. Compare and contrast passive, active, and semi active approaches to
investing;
h. Discuss the role of capital market expectations in the portfolio
management process;
i. Discuss the role of strategic asset allocation in the portfolio management
process;
j. Discuss the roles of portfolio selection/composition and portfolio
implementation in the portfolio management process;
k. Contrast the elements of performance evaluation;
l. Explain the purpose of monitoring and rebalancing;
m. Formulate the elements of portfolio management as an ongoing process;
n. Formulate and justify a risk objective for an investor;
o. Formulate and justify a return objective for an investor;
p. Determine the liquidity requirement of an investor and evaluate the effects
of a liquidity requirement on portfolio choice;
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q. Contrast the types of time horizons, determine the time horizon for an
Investor, and evaluate the effects of the investor’s time horizon on
portfolio choice;
r. Determine the tax concerns, legal and regulatory factors, and unique
circumstances for an investor and evaluate their effects on portfolio
choice;
s. Justify ethical conduct as a requirement for managing investment
portfolios.
B. “Managing Individual Investor Portfolios”
The Investors should be able to
a. Review situational profiling for individual investors and discuss source of
wealth, measure of wealth, and stage of life as approaches to situational
profiling;
b. Prepare an elementary situational profile for an individual investor;
c. Discuss the role of psychological profiling in understanding individual
investor behavior;
d. Formulate the basic principles of the behavioral finance investment
framework;
e. Discuss the influence of investor psychology on risk tolerance and
investment choices;
f. Discuss the use of a personality typing questionnaire for identifying an
investor’s personality type;
g. Formulate the relationship between risk attitudes and decision-making
styles and individual investor personality types;
h. Discuss the potential benefits for both clients and investment managers of
having a formal investment policy statement;
i. Review the process involved in creating an investment policy statement for
a client;
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j. Discuss each of the major objectives that are part of an individual
investor’s investment policy statement;
k. Distinguish between an individual investor’s ability to take risk and
willingness to take risk;
l. Discuss the setting of risk and return objectives for individual investor
portfolios;
m. Discuss each of the major constraints that are part of an individual
investor’s investment policy statement;
n. Formulate and justify an investment policy statement for an individual
investor;
o. Demonstrate the use of a process of elimination to arrive at an appropriate
strategic asset allocation for an individual investor;
p. Determine the strategic asset allocation that is most appropriate given an
individual investor’s investment objectives and constraints;
q. Compare and contrast traditional deterministic versus Monte Carlo
approaches in the context of retirement planning;
r. Discuss the advantages of the Monte Carlo approach to retirement
planning.
C. “Forming Portfolios”
The investors should be able to
a. Explain how mental accounting may lead both individual and institutional
investors to misperceive risk;
b. Discuss how the concept of correlation is generally not implemented when
investors affected by mental accounting build portfolios;
c. Explain how mental accounting can result in naive diversification as
compared to the efficient diversification that results from implementing
MPT.
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D. Learning Outcomes
1. “Managing Institutional Investor Portfolios”
The investors should be able to
a. Contrast a defined-benefit plan to a defined-contribution plan from the
perspectives of both the employee and employer;
b. Discuss investment objectives and constraints for defined-benefit plans;
c. Evaluate pension fund risk tolerance when risk is considered from the
perspective of the (1) plan surplus, (2) sponsor financial status and
profitability, (3) sponsor and pension fund common risk exposures, (4)
plan features, and (5) workforce Characteristics;
d. Formulate an investment policy statement for a defined-benefit plan;
e. Evaluate the risk management considerations in investing pension plan
assets;
f. Formulate an investment policy statement for a defined-contribution plan;
g. Discuss hybrid pension plans (e.g., cash balance plans) and employee
stock ownership plans;
h. Distinguish among the types of foundations with respect to their
description, purpose, source of funds, and annual spending requirements;
i. discuss investment objectives and constraints for foundations,
endowments, insurance companies, and banks;
j. Formulate an investment policy statement for a foundation, an endowment,
an insurance company, and a bank;
k. Contrast investment companies, commodity pools, and hedge funds to
other types of institutional investors;
l. Evaluate the factors that affect the investment policies of pension funds,
foundations, endowments, life and non-life insurance companies, and
banks;
m. Distinguish among the return objectives, risk tolerances, liquidity
requirements, time horizons, tax considerations, legal and regulatory
environment, and unique.
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n. Compare and contrast the asset/liability management needs of pension
funds, foundations, endowments, insurance companies, and banks;
o. Compare and contrast the investment objectives and constraints of
institutional investors given relevant data such as descriptions of their
financial circumstances and attitudes toward risk.
Simple Sharpe Portfolio
The question is whether our portfolio has performed well when compared to
other managed funds such as closed end funds open ended money market funds.
Management performance evaluation
It is measured by comparing the yield of managed portfolio with the
market index (or) with a random portfolio.
Yield = (NAVt- Dt/NAV t-1) – 1
Dt = total of all distribution both income-gains
When managed fund yield > Unmanaged fund
Sharpe’s performance measure
St=Rt-r^0/
St= Sharpe index
Rt=Average return of portfolio
=SD
r^0= Risk free return
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The Treynor Measure
Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above
risk free rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and
systematic risk associated with it (beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the
fund.All risk-averse investors would like to maximize this value. While a high and
positive Treynor's Index shows a superior risk-adjusted performance of a fund, a low
and negative Treynor's Index is an indication of unfavorable performance
Jenson Model
Jenson's model proposes another risk adjusted performance measure. This measure
was developed by Michael Jenson and is sometimes referred to as the Differential
Return Method. This measure involves evaluation of the returns that the fund has
generated vs. the returns actually expected out of the fund given the level of its
systematic risk. The surplus between the two returns is called Alpha, which measures
the performance of a fund compared with the actual returns over the period. Required
return of a fund at a given level of risk (Bi) can be calculated as:
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it,
alpha can be obtained by subtracting required return from the actual return of the
fund.
Higher alpha represents superior performance of the fund and vice versa. Limitation
of this model is that it considers only systematic risk not the entire risk associated
with the fund and an ordinary investor cannot mitigate unsystematic risk, as his
knowledge of market is primitive.
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3.1 INDUSTRY PROFILE
The capital market is a market for financial assets, which have longer or
indefinite maturity. Generally, it deals with long-term securities which have maturity
period of above one year. The capital market may be further divided into three
namely.
1. Industrial securities market
2. Government securities market
3. Long-term loan market
The industrial market, which deals with shares and debentures, can
further be divided into:
1. Primary market
2. Secondary Market
PRIMARY MARKET
In the primary market, securities are offered to public for subscription for
the purpose of raising capital or fund. Secondary market is an equity trading avenue in
which already existing/pre- issued securities are traded amongst investors. Secondary
market could be either auction or dealer market. While stock exchange is the part of
an auction market, Over-the-Counter (OTC) is a part of the dealer market. In addition
to the traditional sources of capital from family and friends, start up firms are created
and nurtured by Venture Capital Funds and Private Equity Funds. According to the
Indian Venture Capital Association Yearbook (2003), investments of $881 million
were injected into 80 companies in 2002, and investments of $470 million were
injected into 56 companies in 2003. The firms which received these investments were
drawn from a wide range of industries, including finance, consumer goods and health.
The growth of the venture capital and private equity mechanisms in India is
critically linked to their track record for successful exits. Investments by these funds
only commenced in recent years, and we are seeing a rapid build-up in a full range of
channels for exit, with a mix of profitable and unprofitable outcomes.
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The success with exit suggests that investors will allocate increased resources
to venture funds and private equity funds operating in India, who will (in turn) be able
to fund the creation of new firms.
SECONDARY MARKET
Secondary Market refers to a market where securities are traded after being
initially offered to the public in the primary market and/or listed on the Stock
Exchange. Majority of the trading is done in the secondary market. Secondary market
comprises of equity markets and the debt markets. For the general investor, the
secondary market provides an efficient platform for trading of his securities. For the
management of the company, Secondary equity markets serve as a monitoring and
control conduit—by facilitating value-enhancing control activities, enabling
implementation of incentive-based management contracts, and aggregating
information (via price discovery) that guides management decisions.
STOCK MARKET
Stock market is a market where trading of company stocks, other securities
and derivatives takes place. Stock exchanges are corporations or mutual organizations
which are specialized in trading stocks and securities. The first security was issued
publicly in Venice in the fourteenth century where the government made the first
known issue of bonds. Merchants and landowners purchased these securities as
investments.
The stock exchange or secondary market is a highly organized market for the
purchase and sale of second hand quoted of listed securities. The securities contracts
(Regulation) Act 1956 defines a stock exchange as “an association, organization or
not, established for the purpose of assisting, regulating and controlling business in
buying, selling and dealing in securities”.
Of all the modern service institutions, stock exchange plays a crucial agents
and facilitators of entrepreneurial progress. After the industrial resolution, as the size
of the business enterprises grew, it was no longer possible for individual person or
even partnerships to raise such huge amount for undertaking these ventures. Such
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huge requirements of capital can be met only large number of individuals.
These investors could be expected to participate actively only if investment is
liquid or they could sell a part of their stake whenever they wish to generate cash.
This liquidity can be achieved through shares and debentures representing smallest
units of ownership and lending represented by the public. The institution where these
securities are traded is known as stock exchange. This stock exchange is one of the
most important institutions in the capital market.
BOMBAY STOCK EXCHANGE
The origin of the Bombay stock exchange date back to 1875. it was organized
under the name of “ the native stock and shares brokers association” as a voluntary
and non-profit making association. It was recognized on a permanent basis in 1957.
This premier stock exchange is the oldest stock exchange in Asia. The objectives of
the stock exchanges are:
1. To safeguard the interest of the investing public having dealings on the
exchange.
2. To establish and promote honorable and just practices in securities
transaction.
3. To promote, develop, and maintain well regulated market for dealing in
securities.
4. To promote industrial development in the country through efficient
resource mobilization by the way of investment in corporate securities.
National Stock Exchange (NSE)
With the liberalization of the Indian economy, it was found inevitable to lift the
Indian stock market trading system on par with the international standards. On the
basis of the recommendations of high powered Pherwani Committee, the National
Stock Exchange was incorporated in 1992 by Industrial Development Bank of India,
Industrial Credit and Investment Corporation of India, Industrial Finance Corporation
of India, all Insurance Corporations, selected commercial banks and others.
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Trading at NSE can be classified under two broad categories:
(a) Wholesale debt market and
(b) Capital market.
Wholesale debt market operations are similar to money market operations -
institutions and corporate bodies enter into high value transactions in financial
instruments such as government securities, treasury bills, public sector unit bonds,
commercial paper, certificate of deposit, etc.
There are two kinds of players in NSE:
(a) Trading members and
(b) Participants.
Recognized members of NSE are called trading members who trade on behalf of
themselves and their clients. Participants include trading members and large players
like banks who take direct settlement responsibility.
Trading at NSE takes place through a fully automated screen-based trading
mechanism which adopts the principle of an order-driven market. Trading members
can stay at their offices and execute the trading, since they are linked through a
communication network. The prices at which the buyer and seller are willing to
transact will appear on the screen. When the prices match the transaction will be
completed and a confirmation slip will be printed at the office of the trading member.
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NSE has several advantages over the traditional trading exchanges. They are as
follows:
• NSE brings an integrated stock market trading network across the nation.
• Investors can trade at the same price from anywhere in the country since inter-
market operations are streamlined coupled with the countrywide access to the
securities.
• Delays in communication, late payments and the malpractice’s prevailing in
the traditional trading mechanism can be done away with greater operational
efficiency and informational transparency in the stock market operations, with
the support of total computerized network.
Unless stock markets provide professionalized service, small investors and foreign
investors will not be interested in capital market operations. And capital market being
one of the major sources of long-term finance for industrial projects, India cannot
afford to damage the capital market path. In this regard NSE gains vital importance in
the Indian capital market system.
Dematerialization
Dematerialization ('Demat' in short form) signifies conversion of a share
certificate from its present physical form to electronic form for the same number of
holding. It offers scope for paperless trading through state-of-the-art technology,
whereby share transactions and transfers are processed electronically without
involving any share certificate or transfer deed after the share certificates have been
converted from physical form to electronic form. Demat attempts to avoid the time
consuming and complex process of getting shares transferred in the name of buyers as
well its inherent problems of bad deliveries, delay in processing/fraudulent
interception in postal transit, etc.
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Dematerialization of shares is optional and an investor can still hold shares in
physical form. However, he/she has to demat the shares if he/she wishes to sell the
same through the Stock Exchanges. Similarly, if an investor purchases shares, he/she
will get delivery of the shares in demat form only. The Depositories Act 1996 has
been enacted to regulate the matters related and incidental to the operation of
Depositories and demat operations. Two Depositories are in operation - National
Securities Depository Limited (NSDL) and Central Depository Services Limited
(CDSL).
Depositories and Depositary Participants
A depository is a place where the stocks of investors are held in electronic form.
There are only two depositories in India, The National Securities Depository Ltd
(NSDL) and the Central Depository Services Ltd (CDSL). Under the arrangement, the
Depository acts as registered owner of the securities in electronic form in the books of
issuing company and the client will be the beneficial owner. The Depositary
Participants are the agents governed by Depositories through which one can operate
the demat account. Depository participants are mainly banks and brokers. There are
over a 100 DPs in India.
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3.2 COMPANY PROFILE
Introduction
Edelweiss Financial Services Limited (formerly Edelweiss Capital Limited),
incorporated on 21st November 1995, has emerged as one of India’s leading
diversified financial services group. The Edelweiss Group offers one of the largest
ranges of products and services spanning varied asset classes and diversified
consumer segments. The Group’s businesses are broadly divided into Life Insurance,
Housing Finance, Asset Management, Credit, Commodities and Capital Markets
including Investment Banking and Brokerage Services. The company’s research
driven approach and consistent ability to capitalize on emerging market trends has
enabled it to foster strong relationships across corporate, institutional, HNI and Retail
clients. Edelweiss Group employs around 2944 employees, leveraging a strong
partnership culture and unique model of employee ownership. It operates through 265
own offices and 32 franchise-led offices in over 140 cities in India. It also has a strong
network of over 4500 Sub-brokers and Authorized Persons pan India. The Edelweiss
Group is a conglomerate of 51 entities including 45 Subsidiaries and 5 Associate
companies (December, 11), which is engaged in the business of providing diverse
financial services. It is a listed company since December 2007under the symbols
NSE: EDELWEISS, BSE: 532922, Reuters: EDEL.BO and Bloomberg: EDEL.IN.
The core philosophy of ‘Ideas create, values protect’ is translated into an
approach that is led by entrepreneurship and creativity, and protected by intellectual
rigour, research and analysis.
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Evolution of Edelweiss
Business Overview
The current businesses of Edelweiss are organized around six broad lines –
Life Insurance, Housing Finance, Asset Management, Credit, Commodities and
Capital Markets. Life Insurance and Housing Finance businesses have been launched
recently and are the newest businesses of the group. The Asset Management
businesses include offshore and domestic asset management. The Credit Businesses
include collateralized loans to Promoters and Corporates, Margin funding, ESOP
financing and IPO financing. Commodities business includes import of precious
metals and distribution. Capital Markets businesses include investment banking,
brokerage services – institutional, HNI and retail and financial products distribution.
Since inception, Edelweiss has successfully followed a strategy of
diversifying into adjacent markets, newer asset classes, newer client segments and
adjacent products. This strategy has well supported the operations of Edelweiss across
cycles by bringing stability to its performance. As a result, Edelweiss has emerged as
a truly diversified leading financial services organization with a large range of
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products and services covering multiple asset classes and consumer segments and
well diversified revenue streams.
To aptly reflect this diversified nature of the businesses of Edelweiss and the
transition to a financial services organization from a capital market led firm, the name
of the company was changed from Edelweiss Capital Limited to Edelweiss Financial
Services Limited in August 11.
LIFE INSURANCE
Edelweiss Tokio life Insurance is the first of the new generation Insurance
companies in India as a joint venture with Tokio Marine, one of the fastest growing
life Insurance companies in Japan. Capitalizing on the immense growth potential in
the life insurance sectors that the country offers, Edelweiss Tokio life insurance has
set up operations in India with a startup capital of Rs. 550 crores – highest for any
Indian insurer, dedicated to building a long term sustainable business focused on
consumer centricity. The business commenced operations in July �11 with the launch
of diverse products after receiving final approvals from IRDA. The products include
term plan, savings options, credit protection and ULIP funds. It has expanded
operations by opening 22 offices in 15 centers and has appointed over 530 Personal
Financial Advisors (PFAs). It plans to expand its presence and to more centers going
forward. Life Insurance market in India currently ranks 136th in the world in
penetration and is expected to emerge as one of the top three markets by 2020. This
business, therefore, presents exciting opportunities for long-term growth going
forward.
HOUSING FINANCE
Edelweiss has taken a major step in diversifying its asset class in the credit
book through the launch of its housing finance business in H2FY11. The housing
finance subsidiary initially launched its business in Mumbai and has expanded it to
include the National Capital Region, Ahmedabad, Bangaluru, Pune and Hyderabad.
Considering that it is the aspirations of all Indians to own a home, this business
represents an exciting opportunity reinforcing Edelweiss� intent to cover a larger
retail footprint. The business offers home loans, loans against property and lease
rental discounting.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 45
ASSET MANAGEMENT
The Asset Management business includes Domestic Asset Management
(AMC) and Alternative Asset Management business. Edelweiss Asset Management
Company has launched a mix of 11 equity and debt funds. It has an active base of
over 5700 clients and has scaled up the distribution network by empanelling over
3000 distributors. The current focus of this business is on broad basing the product
portfolio and building investment track record. Alternative Asset Management
currently focuses largely on offshore institutional investors offering
advisory/management expertise for India focused Multi-Strategy Fund, Real Estate
Fund and a Special Opportunities Fund. Recent Initiatives include launch of an ARC,
an Asset Reconstruction Fund and EW SBIH Crossover Fund in joint sponsorship
with SBI Holdings of Japan.
CREDIT
With a deep knowledge and understanding of capital markets backed by strong
origination capabilities, the Company’s primary offering in the financing business
includes collateralized loan products such as sponsor funding, loans against shares,
IPO financing, loans against ESOPs and margin funding etc. The sponsors of mid-to-
large corporate constitute its key clientele. Its prudent financing norms, strong risk
management and a conservative margin of safety ensures low non–performing loans.
Edelweiss continues to work on new product offerings around other asset classes.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 46
CAPITAL MARKETS
Investment Banking
Equity Capital Markets & Advisory Services
Edelweiss has one of the most extensive product offerings in Investment
Banking in India, catering to different market and client segments. The verticals
within Investment Banking include Equity Capital Markets which include IPOs/FPOs,
QIPs, Rights and Open Offers, and Advisory services which offer Mergers &
Acquisitions Advisory, Private Equity Syndication, Structured Finance Advisory and
Infrastructure Advisory. Edelweiss enjoys strong franchise with emerging and mid-
market companies which is reflected in the # 1 ranking in both Bloomberg tables for
Mid-market Private Equity placements in CY2007 and Prime Database league tables
for IPOs in Mid-market segment in FY2008. It was adjudged winner in the Best
Merchant Banker category in the Outlook Money NDTV Profit Awards 2008.
It was ranked # 2 in QIPs and # 3 in ECM (QIP+IPO/FPO+Rights) in FY10. For
FY11 it is ranked # 2 in ECM by number of deals below ` 400 crore. Overall, it was
among the top 10 players in ECM by number of deals in the country in FY11
(Rankings source: Prime Database). Its client segments now range from private to
public sector and from Mid-caps to Large-caps across different industries.
Corporate Debt Syndication
The Debt Syndication Desk focuses on origination, sales, trading and research.
It has gained a strong foothold and visibility in the market.
Ranked # 2 in CP placement and Short Term Debt placement for FY09
Ranked # 4 in CP placement and Short Term Debt placement for FY10
Ranked # 3 in Short Term Debt placement and ranked # 4 in CP placement in FY11
Overall Edelweiss is now ranked # 6 among the debt arrangers in the country in
9MFY12
(Rankings source: Prime Database)
Its clients in the recent past included large corporates like RIL, Aditya Birla Group,
SAIL, REC, PFC, PGC, IFCI,
IRFC, Tata Capital, Tata Motors Finance, Sundaram Finance, Yes Bank, SBI Group,
BoI, Canara Bank etc.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 47
Brokerage Services
Institutional Equities
Edelweiss has one of the leading institutional equities businesses in India
backed by a large and experienced research team and a large and diversified client
base with a market share of 4 to 4.5%, among the highest in Indian brokerage firms.
Intense servicing, seamless execution and innovative research products have helped
Edelweiss build strong relationships with over 400 active institutional investors,
including domestic institutional investors and FIIs across different geographies.
Edelweiss provides broad corporate access via annual Investor Conferences in
different locations across the world with a strong investor and Indian corporate
participation. Research coverage presently extends to 189 companies across 20
sectors accounting for over 70% of total market capitalization representing one of the
largest Research coverage universes. The quality and caliber of research associated
with Edelweiss is widely regarded across the institutional community. It continues to
focus on path breaking Perspective Research which identifies future trends before
they become popular. After the landmark India 2020 Report that Edelweiss published
in March 10, it has come out with another thematic report on opportunities Rural
India offers. The Prescriptive Research of Edelweiss believes in never missing a beat
with multi dimensional company research covering important company events like
quarterly results, bottom up equity research and special reports such as Annual Report
analysis and Analysis beyond Consensus. It is also considered a Thought Leader in
Alternative and Quant Research with over 15 regular products such as pair trading
strategies, corporate action tracker etc. Edelweiss� commitment to provide cutting
edge research has resulted in a pioneering effort to provide online research to its
clients through the portal with smart features of quick sorting of information, analysis
and convenient archiving.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 48
HNI Broking
Edelweiss offers dedicated equities and commodities broking services to high
net-worth individuals with a strong emphasis on building long-term relationships with
clients. Product offerings include specialized trading execution for active trading
clients and structured products backed by high quality execution and reporting.
Retail Broking & Distribution
Retail Broking and Distribution are the new initiatives of the Group under its
Retail Business strategy. The organic Retail broking business is through the online
portal and provides advisory and research based broking services supported by high
quality execution platform and best in class reporting. It currently has over 121,000
clients under the online broking. Edelweiss has also completed the acquisition of
Anagram Capital Limited in July �10, now renamed as Edelweiss Financial Advisors
Ltd. The offline broking model has around 243,000 clients. Retail broking business
has also expanded its presence through a strong network of over 4500 sub-brokers and
Authorized Persons in over 580 cities.
Distribution business focuses on giving advice and analyzing the best financial
product options available in the market. It involves the distribution of the full range of
third party financial products and services including IPO syndication for the retail
customer. For FY11 Edelweiss is ranked # 1 in HNI category and # 3 in Retail
category by amount mobilized in IPOs. It was also ranked # 1 in both HNI and Retail
categories in the recent IPO of MOIL Ltd by amount procured. Overall, it was second
largest mobilizer of IPO subscriptions in all categories taken together (non-ASBA) in
FY11 (Source: Prime Database).
Wealth Advisory & Investment Services
The Primary focus is on understanding each client's profile including life
style, risk appetite, growth expectations, and current financial position and income
requirements to create comprehensive and tailored investment strategies. The broad
range of offerings includes a truly multi-asset class allocation advisory to Structured
Products, Portfolio Management, Mutual Funds, Insurance, Derivatives Strategies,
Direct Equity, Private Equity, Commodities and Real Estate Funds etc. Recent launch
includes Financial Planning advisory services.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 49
Treasury
The Treasury operations in Edelweiss are similar to that of a Treasury in a
Commercial Bank and focus on liquidity management with capital preservation. This
business adopts a multi–strategy/multi-book approach to diversify and grow its
portfolio while imparting liquidity in the balance sheet. The group follows a
disciplined and conservative approach to cash management with emphasis on strong
risk policies. This has resulted in a low or no correlation between the market returns
and the treasury performance.
Growth Initiatives
Edelweiss continues to build on the following growth initiatives with the
objective of diversifying its client segments and product classes in its quest to emerge
as a fully diversified financial services organization: It has invested in Life Insurance
business which has been launched recently.
It has completed the acquisition of Anagram Capital during FY11, now
rebranded as Edelweiss Financial Advisors Limited. This acquisition will help it in
expanding its Retail Broking and Distribution businesses. Edelweiss has also invested
in building its online retail broking format organically with an aspiration to become a
significant player in this industry.
The Housing Finance subsidiary commenced business in the latter half of
FY11 and has plans to scale up the business going forward. Its Alternative Asset
Management business closed the EW Special Opportunities Fund in FY11. It has also
launched an Asset Reconstruction Fund and EW SBIH Crossover Fund recently.
Edelweiss considers this business as a growth opportunity within its wholesale
businesses.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 50
Corporate Structure
Shareholding Pattern
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 51
Financial Performance at a Glance
Edelweiss has delivered strong operating and financial performance since
inception, consistently demonstrating a strong track record of high growth and
profitability. Its Revenues have grown at a 12-year CAGR of 77% and PAT at 67%
till FY11. As at the end of 31st March 11 Edelweiss Group’s Net worth excluding
minority interest stood at RS24.40 billion (Rs25.55 billion including minority
interest), indicating a strong balance sheet. Equity capital is the primary source of
funding for the group besides debt. The leverage as on 31st March 11 is 3.4 times
including the Minority Interest indicating a healthy position whereby the balance
sheet can be further levered. Consolidated Financial Performance of Edelweiss
Financial Services Limited:
Edelweiss benefits from a strong and liquid balance sheet with a reasonable
leverage. A strong capital base and adequate profitability year after year allows
Edelweiss to constantly invest in new businesses with an eye on future growth while
scaling up the existing businesses. A large capital base also allows it to transact larger
volumes of broking and trading in the markets giving it a leadership position in
Institutional Equities business. It also enables the group to add debt capital as and
when required at reasonable rates. Its market capitalization as on 31st March 11 was
30 billion Rs.
Corporate Social Responsibility
At Edelweiss, Corporate Social Responsibility is a part of its DNA and it
focuses on initiatives that help to build a better, more equitable and sustainable
society. For Edelweiss, CSR means giving back to the society – beyond the call of the
business. EdelGive Foundation, the CSR wing of Edelweiss, has accordingly been
formed to create an effective institutional platform to provide structure and direction
to the philanthropic activities of Edelweiss, its employees, its clients and its
associates. Its primary focus is on creating educational, employment and sustainable
livelihood opportunities for the underprivileged and it brings an „institutional banking
and venture capital” rationale and thinking to the social sector. Edelweiss leverages its
strengths - the ability and expertise to act as a bridge between providers and
consumers of capital - to achieve the objective of addressing the primary needs of the
social sector.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 52
Edelweiss Social Innovation Honours is a CSR initiative to encourage NGOs
who are working to improve the status of the girl child in the areas of health,
education and employability. The Social Innovation Honours for the year 2010-11
received overwhelming response and 5 NGO were selected for the award for their
innovative work to empower women. The process for finalizing the Honours for
2011-12 is underway and will be completed in Q4FY12.
Edelweiss has been rated among the top 5% of companies in terms of CSR by
Karmyog.com.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
DISTRIBUTION OF RESPONDENTS ACCORDING TO GENDER
Interpretation:
From the above table it is clear that
male. That is 100% males.
DISTRIBUTION OF RESPONDENTS ACCORDING TO GENDER
Gender
Male
Female
Total
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
4.1 DATA ANALYSIS
TABLENO: 1
DISTRIBUTION OF RESPONDENTS ACCORDING TO GENDER
From the above table it is clear that all the surveyed Respondents are
male. That is 100% males.
CHART NO: 1
DISTRIBUTION OF RESPONDENTS ACCORDING TO GENDER
100%
0%
No of Respondents Percentage
100 100%
-
100 100%
53
DISTRIBUTION OF RESPONDENTS ACCORDING TO GENDER
Respondents are
DISTRIBUTION OF RESPONDENTS ACCORDING TO GENDER
male
female
Percentage
100%
-
100%
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
DISTRIBUTION OF RESPONDENTS ACCORDING TO AGE
Age
<30
31-40
41-50
>50
Total
Interpretation:
From the above table, it shows that
40, 32% of the respondents are in the age between 41
in the age <30, and it is revealing that people above age 50 are 3% onl
DISTRIBUTION OF RESPONDENTS ACCORDING TO AGE
32%
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
TABLENO: 2
DISTRIBUTION OF RESPONDENTS ACCORDING TO AGE
No of Respondents Percentage
23
42
32
3
100
From the above table, it shows that 42% of the respondents are in the age between 31
40, 32% of the respondents are in the age between 41-50, 23% of the respondents are
in the age <30, and it is revealing that people above age 50 are 3% onl
CHART NO: 2
DISTRIBUTION OF RESPONDENTS ACCORDING TO AGE
23%
42%
3%
54
DISTRIBUTION OF RESPONDENTS ACCORDING TO AGE
Percentage
23%
42%
32%
3%
100%
42% of the respondents are in the age between 31-
50, 23% of the respondents are
in the age <30, and it is revealing that people above age 50 are 3% only.
DISTRIBUTION OF RESPONDENTS ACCORDING TO AGE
<30
30-40
40-50
>50
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 55
TABLENO: 3
DISTRIBUTION OF RESPONDENTS ACCORDING TO INCOME
LEVEL
Income Level No of Respondents Percentage
<5000 0 0
5001-10000 12 12%
10001-15000 13 13%
15001-20000 47 47%
>20001 28 28%
Total 100 100%
Interpretation:
From the above table, it shows that47% of the respondents falls in the
category of 15000-20000, 28% of the respondents falls in the category of >20000,
13% of respondents falls in the category of 10000-15000, 12% of the respondents
falls in the category of 5000-10000, and none of the respondents falls in the category
of <5000.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
DISTRIBUTION OF RESPONDENTS ACCORDING TO INCOME
28%
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 3
DISTRIBUTION OF RESPONDENTS ACCORDING TO INCOME
LEVEL
0%
12%
13%
47%
56
DISTRIBUTION OF RESPONDENTS ACCORDING TO INCOME
<5000rs
5000-10000
10000-15000
15000-20000
>20000
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 57
TABLENO: 4(1)
TABLE SHOWING RESPONDENT’S OPINION
EXPERIENCE IN STOCK MARKET
Respondents Opinion No of Respondent Percentage
Yes 100 100%
No 0 0
Total 100 100%
Interpretation:
From the above table, it shows that all of the respondents have previous experience in
stock market.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(1)
RESPONDENT’S OPINION
100%
0%
58
YES
NO
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 59
TABLENO: 4(2)
TABLE SHOWING RESPONDENT’S OPINION
TYPE OF INVESTMENT PREFERRED BY THE RESPONDENTS
Type of Investment No of Respondent Percentage
Bonds 7 7%
Equities 88 88%
Bank Deposits 5 5%
T-Bills 0 0
Government Securities 0 0
Total 100 100%
Interpretation:
From the above table, it shows that88% of the respondents prefer to invest in Equities,
7% of the respondents prefer to invest in Bonds, 5% of the respondents prefer to
invest in Bank Deposits, and none of the respondents are interested to invest in either
treasury bills or Government Securities.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
10
20
30
40
50
60
70
80
90
bonds
7
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(2)
RESPONDENT’S OPINION
equities bank
deposits
T-bills Govt
Securities
88
5
0
60
Govt
Securities
0
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 61
TABLENO: 4(3)
TABLE SHOWING RESPONDENT’S OPINION
TIME TAKEN FOR EVALUATION OF PERFORMANCE OF INVESTMENT
Period of Time No. Of Respondents Percentage
Monthly
9 9%
Quarterly 71 71%
Annually 13 13%
Over 5 Years
7 7%
Total 100 100%
Interpretation:
From the above table, it is clear that 71% of the respondents judge the performance of
investment in a Quarterly, 13% of the respondents judge their performance of
investment by Annually, 9% of the respondents judge the performance of investment
Monthly and 7% of the respondents take over 5 years to judge the performance of the
investment.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
10
20
30
40
50
60
70
80
quarterly
9
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(3)
RESPONDENT’S OPINION
monthly annualy over 5 years
71
13
62
over 5 years
7
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 63
TABLENO: 4(4)
TABLE SHOWING RESPONDENT’S OPINION
PERFORMANCE ABOUT THEIR FINANCIAL FUTURE
Financial Future No. Of Respondents Percentage
Very optimistic
32 32%
Positive
33 33%
Unsure
18 18%
Pessimistic
17 17%
Total 100 100%
Interpretation:
From the above table, it shows that 33% of the respondents are positive about their
financial future, 32% of the respondents are Very optimistic, 18% of the respondents
are unsure about their financial future and 17% of the respondents are Pessimistic.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
5
10
15
20
25
30
35
very optimistic
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(4)
RESPONDENT’S OPINION
very optimistic positive unsure pessimistic
64
pessimistic
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 65
TABLENO: 4(5)
TABLE SHOWING RESPONDENT’S OPINION
AGE FROM WHICH THE RESPONDENTS ARE INVESTING
Age of Investing No. Of Respondents Percentage
<30 23 23%
31-40 42 42%
41-50 32 32%
>50 3 3%
Total 100 100%
Interpretation:
From the above table, it is found that 42% of the respondents have invested in age
between 31 to 40 years, 32% of the respondents have invested in the age between 41
to 50 years, 23% of the respondents have invested in the age Below 30, and it is
revealing that people above 50 years only 3% have been investing.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
5
10
15
20
25
30
35
40
45
<30
23
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(5)
RESPONDENT’S OPINION
30-40 40-50 >50
42
32
66
>50
3
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 67
TABLENO: 4(6)
TABLE SHOWING RESPONDENT’S OPINION
UNDERSTANDING AND COMFORT LEVEL IN INVESTING IN STOCK
Understanding and
Comfort level No. Of Respondents Percentage
No Experience in
Stock Market
3 3%
No Experience, but
some level of comfort
22 22%
Some Experience &
Interest
58 58%
Reasonable
Experience
7 7%
Extensive
Background and good
comfort
10 10%
Total 100 100%
Interpretation:
From the above table, shows that 58% of the respondents have Some Experience &
Interest, 22% of the respondents have No Experience, but some level of comfort, 10%
of the respondents have Extensive Background and good comfort, 7% of the
respondents have Reasonable Experience and 3% of the respondent is having No
Experience in Stock Market.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
58%
7%
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(6)
RESPONDENT’S OPINION
3%
22%
58%
10%
· No Experience in Stock
Market
· No Experience, but
some level of comfort
· Some Experience &
Interest
· Reasonable Experience
Extensive Background and
good comfort
68
No Experience in Stock
No Experience, but
some level of comfort
Some Experience &
Reasonable Experience
Extensive Background and
good comfort
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 69
TABLENO: 4(7)
TABLE SHOWING RESPONDENT’S OPINION
INVESTORS PERCEPTION OF THEMSELVES
Best Statement No. Of Respondents Percentage
Some Current Income
12 12%
High Current Income 18 18%
High Total Return
57 57%
Substantial Return 13 13%
Total
100 100%
Interpretation:
From the above table, it is found that 57% of the respondents perceive High Total
Return as the best statement, 18% of the respondents perceive High Current Income,
13% perceive as Substantial Return and 12% of the respondents perceive as Some
Current Income.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
10
20
30
40
50
60
· Some
Current Income
12
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(7)
RESPONDENT’S OPINION
Current Income
· High Current
Income
· High Total
Return
· Substantial
Return
18
57
70
Substantial
Return
13
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 71
TABLENO: 4(8)
TABLE SHOWING RESPONDENT’S OPINION
ATTITUDE ABOUT FINANCIAL RISK
Attitude about
Financial risk No. Of Respondents Percentage
Diversified investment
portfolio
24 24%
I Only invested with
extra money I can
afford to loss
46 46%
Associated with
playing in the stock
8 8%
The Higher the
investment yield or
rate of return the
greater the risk
22 22%
Total 100 100%
Interpretation:
From the above table, it is clear that 46% of the respondents invest with extra money
they can afford to loss, 24% of the respondents have diversified investment portfolio,
22% of the respondents has an attitude that The Higher the investment yield or rate of
return the greater the risk and 8%are associated with playing in the stock market.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
8%
22%
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(8)
RESPONDENT’S OPINION
24%
46%
· Diversified investment
portfolio
· I Only invested with
extra money I can afford to
loss
· Associated with playing
in the stock
· The Higher the
investment yield or rate of
return the greater the risk
72
Diversified investment
I Only invested with
extra money I can afford to
Associated with playing
in the stock
The Higher the
investment yield or rate of
return the greater the risk
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
TABLE SHOWING RESPONDENT’S OPINION
PORTFOLIO ACTIVITIES BY THE RESPONDENTS
Any Portfolio
Activities
Yes
No
Total
Interpretation:
From the above table,
activities and 44% of the respondents
40%
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
TABLENO: 4(9)
TABLE SHOWING RESPONDENT’S OPINION
PORTFOLIO ACTIVITIES BY THE RESPONDENTS
Any Portfolio No. Of Respondents Percentage
66
44
100
From the above table, it shows that 66% of the respondents are having portfolio
the respondents do not have portfolios.
CHART NO: 4(9)
RESPONDENT’S OPINION
60%
73
TABLE SHOWING RESPONDENT’S OPINION
PORTFOLIO ACTIVITIES BY THE RESPONDENTS
Percentage
66%
44%
100%
% of the respondents are having portfolio
· Yes
· No
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 74
TABLENO: 4(10)
TABLE SHOWING RESPONDENT’S OPINION
RISK TOLERANCE SINCE THE TIME OF INVESTMENT
Risk Tolerance No. Of Respondents Percentage
More Willingness
4 4%
Less Willingness
81 81%
Risk factors has no influence
11 11%
No Idea
4 4%
Total
100 100%
Interpretation:
From the above table, it shows that 81% of the respondents have less willingness to
take on risk, 11% of the respondents risk factor has no influence, and 4% of the
respondents are willing to risk take more risk as well as 4% of the respondents does
not have any idea about.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
10
20
30
40
50
60
70
80
90
· More
Willingness
4
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(10)
RESPONDENT’S OPINION
More
Willingness
· Less
Willingness
· Risk factors
has no influence
· No Idea
81
11
75
No Idea
4
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 76
TABLENO: 4(11)
TABLE SHOWING RESPONDENT’S OPINION
RESPONSE TO MARKET DECLINE
Liquidation process No. Of Respondents Percentage
Immediately 6 6%
At 90000 4 4%
At 75000 8 8%
Would Wait for Market
turnaround
82 82%
Total 100 100%
Interpretation:
From the above table, it is found that 82% of the respondents would wait for market
turnaround, 8% of the respondents will move at 75000 for stable investment,6% of the
respondents would immediately liquidate and move to a more stable investment, and
4% of the respondents will move at 90000 for stable investment.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
82%
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(11)
RESPONDENT’S OPINION
6%
4%
8%
82%
· Immediately.
· At 90,000
· At 75,000.
Would Wait for Market
turnaround
77
Immediately.
At 90,000
At 75,000.
Would Wait for Market
turnaround
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 78
TABLENO: 4(12)
TABLE SHOWING RESPONDENT’S OPINION
TIME HORIZON FOR WITHDRAWALS
Time Horizon for
withdrawals No. Of Respondents Percentage
Currently 95 95%
Less than 3 Years 5 5%
Between 3 to 5Years 0 0
Between 6 to 15 Years 0 0
After 15 Years 0 0
Total 100 100%
Interpretation:
From the above table, it is found that 95% of the respondents will make withdrawals
currently, 5% withdraw within 3 years and none of the respondents withdrew after 3
years or above.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 79
CHART NO: 4(12)
RESPONDENT’S OPINION
95
5
0 0 00
10
20
30
40
50
60
70
80
90
100
currently · < Than 3
years.
· From 3 to
5 years.
· Between 6
to 15 years.
· Over 15
years.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 80
TABLENO: 4(13)
TABLE SHOWING RESPONDENT’S OPINION
GROWTH EXPECTED OF INVESTMENT IN 5 YEARS
Growth Expected No. Of Respondents Percentage
0 to 15% 30 30%
15% to 30% 54 54%
30% to 50% 11 11%
Above 50% 5 5%
Total 100 100%
Interpretation:
From the above table, it is clear that 54% of the respondents expect their investment
to grow from 15% to 30%, 30% of the respondents expect their investment to grow
from 0 to 15%, 11% of the respondents expect a growth from 30% to 50% and 5% of
the respondents expect a growth above 50%.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
10
20
30
40
50
60
· 0 to 15%
30
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(13)
RESPONDENT’S OPINION
0 to 15% · 15% to 30% · 30% to 50% · Above 50%
54
11
81
Above 50%
5
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
TABLE SHOWING RESPONDENT’S OPINION
SHARING INFORMATION ABOUT RISK WITH CONSULTANT
Feel Free
Yes
No
Total
Interpretation:
From the above table, it is found that 73
information on risk with consultant and 27
information with the consultant
27%
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
TABLENO: 4(14)
TABLE SHOWING RESPONDENT’S OPINION
SHARING INFORMATION ABOUT RISK WITH CONSULTANT
No. Of Respondents
73
27
100
ove table, it is found that 73% of the respondents feel free to share
on risk with consultant and 27% the respondents do not feel free to share
information with the consultant.
CHART NO: 4(14)
RESPONDENT’S OPINION
73%
27%
82
TABLE SHOWING RESPONDENT’S OPINION
SHARING INFORMATION ABOUT RISK WITH CONSULTANT
Percentage
73%
27%
100%
% of the respondents feel free to share
% the respondents do not feel free to share
· Yes
· No
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
TABLE
Learn From Risk
Yes
No
Total
Interpretation:
From the above table, it is found that
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
TABLENO: 4(15)
TABLE SHOWING RESPONDENT’S OPINION
LEARNING FROM RISK
Learn From Risk No. Of Respondents
100
0
100
From the above table, it is found that all the respondents learn from their risk.
CHART NO: 4(15)
RESPONDENT’S OPINION
100%
0%
83
SHOWING RESPONDENT’S OPINION
Percentage
100%
0
100%
respondents learn from their risk.
yes
no
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 84
TABLENO: 4(16)
TABLE SHOWING RESPONDENT’S OPINION
MEASURE TO CONTROL RISK
Measure to Control Risk No. Of Respondents Percentage
Avoidance 36 36%
Modification 6 6%
Stock’s present position 34 34%
Watch market 24 24%
Total 100 100%
Interpretation:
From the above table, it is found that 36% of respondents control the risk by avoiding
it, 34% of the respondents control the risk by evaluating stock’s present position in
the market, 24% of the respondents control the risk by watching the market closely
and 6% of the respondents modify risk to control it.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
5
10
15
20
25
30
35
40
avoid
36
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(16)
RESPONDENT’S OPINION
modify stock's present
position
watch market
6
34
85
watch market
24
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 86
TABLENO: 4(17)
CHI – SQUARE ANALYSIS FOR INCOME LEVEL AND AGE OF
INVESTING
Age of investing
Income Level
Below 30 From
31 to 40
From 41
to 50
Above
50
Grand
Total
Below Rs.5000 0 0 0 0 0
Rs.5001 to Rs.10000 3 4 5 0 12
Rs.10001 to Rs.15000 4 6 2 1 13
Rs.15001to Rs.20000 8 21 17 1 47
Above Rs.20000 8 11 8 1 28
Grand Total 23 42 32 3 100
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 87
Null Hypothesis (H0) : No Significant relationship between Income
and Age of investing.
Alternate Hypothesis (H1) : There is a Close Significant relationship between
Income and Age of investing.
FACTOR
CALCULATED
CHI-SQUARE
VALUE
TABLE
VALUE
DEGREE OF
FREEDOM REMARKS
Income
Level 4.795 21.026 12
Not
Significant
Interpretation:
From the above table, it is clear that the calculated Chi-square value is less
than the table value. So, there is Close relationship between Age group and Age of
investing.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART FORINCOME LEVEL AND AGE OF INVESTING
0
5
10
15
20
25
Below
Rs.5000
Rs.5001 to
Rs.10000
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(17)
CHART FORINCOME LEVEL AND AGE OF INVESTING
Rs.5001 to
Rs.10000
Rs.10001 to
Rs.15000
Rs.15001to
Rs.20000
Above
Rs.20000
88
CHART FORINCOME LEVEL AND AGE OF INVESTING
Below 30
From 31 to 40
From 41 to 50
Above 50
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 89
TABLENO: 4(18)
CHI – SQUARE ANALYSIS FOR INCOME LEVEL AND
PERFORMANCE OF INVESTMENT
Performance of
Investment
Income Level
Quarterly Monthly Annually Over 5
Years
Grand
Total
Below Rs.5000 0 0 0 0 0
Rs.5001 to Rs.10000 2 6 3 1 12
Rs.10001 to
Rs.15000 2 8 2 1 13
Rs.15001to Rs.20000 4 35 5 3 47
Above Rs.20000 1 22 3 2 28
Grand Total 9 71 13 7 100
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 90
Null Hypothesis (H0) : No Significant relationship between
Income level and Performance of investments.
Alternate Hypothesis (H1) : There is Close Significant relationship between
Income level and Performance of investments.
FACTOR
CALCULATED
CHI-SQUARE
VALUE
TABLE
VALUE
DEGREE OF
FREEDOM REMARKS
Income
Level 5.273 21.026 12
Not
Significant
Interpretation:
From the above table it is noted from the above table that the calculated
Chi-square value is less than the table value. So, there is Close relationship between
Income level and Performance of investments.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
5
10
15
20
25
30
35
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(18)
CHART FOR INCOME LEVEL AND
PERFORMANCE OF INVESTMENT
91
Monthly
Quarterly
Annually
Over 5 Years
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 92
TABLENO: 4(19)
CHI – SQUARE ANALYSIS FOR INCOME LEVEL AND
FINANCIAL FUTURE
Financial
Future
Income Level
Very
Optimistic Positive Unsure Pessimistic
Grand
Total
Below Rs.5000 0 0 0 0 0
Rs.5001 to
Rs.10000 4 5 2 1 12
Rs.10001 to
Rs.15000 5 6 1 1 13
Rs.15001to
Rs.20000 16 13 10 8 47
Above Rs.20000 7 9 5 7 28
Grand Total 32 33 18 17 100
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 93
Null Hypothesis (H0) : No Significant relationship between
Income level and Financial Future.
Alternate Hypothesis (H1) : There is Close Significant relationship between
Income level and Financial Future.
FACTOR
CALCULATED
CHI-SQUARE
VALUE
TABLE
VALUE
DEGREE OF
FREEDOM REMARKS
Income
Level 5.334 21.026 12
Not
Significant
Interpretation:
From the above table it that the calculated Chi-square value is less than the table
value. So, there is Close relationship between Income level and Financial Future.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
2
4
6
8
10
12
14
16
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(19)
CHART FOR INCOME LEVEL AND
FINANCIAL FUTURE
94
Very Optimistic
Positive
Unsure
Pessimistic
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 95
TABLENO: 4(20)
CHI – SQUARE ANALYSIS FOR INCOME LEVEL AND
ATTITUDE ABOUT FINANCIAL RISK
Financial
Risk
Income Level
Reduces
Risk
Invest
with
Extra
Money
Associated
with
Playing in
the Stock
Rate of
Returns
Grand
Total
Below Rs.5000 0 0 0 0 0
Rs.5001 to Rs.10000 3 6 1 2 12
Rs.10001 to
Rs.15000 4 5 1 3 13
Rs.15001to
Rs.20000 12 21 4 10 47
Above Rs.20000 5 14 2 7 28
Grand Total 24 46 8 22 100
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 96
Null Hypothesis (H0) : No Significant relationship between
Income level and Financial Risk.
Alternate Hypothesis (H1) : There is Close Significant relationship between
Income level and Financial Risk
FACTOR
CALCULATED
CHI-SQUARE
VALUE
TABLE
VALUE
DEGREE OF
FREEDOM REMARKS
Income
Level 1.381 21.026 12
Not
Significant
Interpretation:
From the above table it is clear that the calculated Chi-square value is less than the
table value. So, there is Close relationship between Income level and Financial Risk
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
ATTITUDE ABOUT FINANCIAL RISK
0
5
10
15
20
25
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(20)
CHART FOR INCOME LEVEL AND
ATTITUDE ABOUT FINANCIAL RISK
Reduces Risk
Invest with Extra Money
Associated with Playing in
the Stock
Rate of Returns
97
Reduces Risk
Invest with Extra Money
Associated with Playing in
the Stock
Rate of Returns
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 98
TABLENO: 4(21)
CHI – SQUARE ANALYSIS FOR INCOME LEVEL AND
RISK TOLERANCE
Risk
Tolerance
Income Level
More
Willingness
Less
Willingness
Risk
Tolerance
No
Idea
Grand
Total
Below Rs.5000 0 0 0 0 0
Rs.5001 to
Rs.10000 1 8 3 0 12
Rs.10001 to
Rs.15000 1 6 5 1 13
Rs.15001to
Rs.20000 1 42 2 2 47
Above Rs.20000 1 25 1 1 28
Grand Total 4 81 11 4 100
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 99
Null Hypothesis (H0) : No Significant relationship between
Income level and Risk Tolerance.
Alternate Hypothesis (H1) : There is Close Significant relationship between
Income level and Risk Tolerance.
FACTOR
CALCULATED
CHI-SQUARE
VALUE
TABLE
VALUE
DEGREE OF
FREEDOM REMARKS
Income
Level 1.381 21.026 12
Not
Significant
Interpretation:
From the above table it is clear that the calculated Chi-square value is
less than the table value. So, there is Close relationship between Income level and
Risk Tolerance.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
0
5
10
15
20
25
30
35
40
45
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur
CHART NO: 4(21)
CHART FOR INCOME LEVEL AND
RISK TOLERANCE
100
More Willingness
Less Willingness
Risk Tolerance
No Idea
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 101
5.1 FINDINGS
• All of the surveyed respondents are male.
• 42% of the respondents are belongs to the age between 31 years to 40 years
old.
• 47% of the respondent’s income is between 15001-20000 Rs.
• All of the surveyed respondents are having previous experience in the stock
market.
• 88% of the respondents prefer to invest in Equities type of investments.
• 71% of the respondents evaluate their performance of investment by quarterly.
• 33% of the respondents are optimistic positive about their financial future.
• 42% of the respondents are invested in age between 31 to 40 years.
• 58% of the respondents are having some experience & interest in the stock
market.
• 57% of the respondents perceive as high total return as best statement about
their investment.
• 46% of the respondents are investing with the extra money they can afford to
suffer loss in the stock market.
• 66% of the respondents are not having any portfolio activities.
• 81% of the respondents are less willing to take risk since the time of first
investment.
• 82% of the respondents would wait for market turnaround.
• 95% of the respondents are need to make withdrawals currently
• 54% of the respondents are expecting their return from the investment with a
growth rate between 15% to 30%.
• 73% of the respondents feel free to share information their consultant.
• All of the respondents learn from their risk.
• 36% of respondents control the risk by avoiding it.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 102
• From the Chi-Square Analysis, there is Close relationship between Age group
and Age of investing.
• From the Chi-Square Analysis, there is Close relationship between Income
level and Performance of investments.
• From the Chi-Square Analysis, there is Close relationship between Income
level and Financial Future.
• From the Chi-Square Analysis, there is Close relationship between Income
level and Financial Risk.
• From the Chi-Square Analysis, there is Close relationship between Income
level and Risk Tolerance.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 103
5.2 SUGGESTIONS
• Since all the respondents are male, an effort to bring females in stock
investment should be taken by the company.
• Most of the females are not aware about stock broking, so a seminar should be
conduct by the company.
• Almost all the respondents are investing in stock with the extra money they
could suffer the loss; an effort should be taken in order to create an awareness
about investing in stocks.
• Almost all of respondents prefer to invest in Equities; an effort should be
taken in order to in create awareness about investing in Commodities and
Bonds.
• Nearly half of the surveyed respondents are not aware about Portfolio activity.
So the company must guide the investors to invest in Portfolio.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 104
5.3 CONCLUSION
The present study is concerned with “Risk Perception and portfolio
Management of Equity Investors.
Risk is the other side of return. Returns comprise two elements, the periodic
payment of interest or dividends (yield) and change in asset values over a period
of time (capital gains/losses). In the common perception risk is mostly related to the
possibility and magnitude of negative deviations from the benchmark. This definition
is supported by Fishburn [1977] and is recognized by most of the financial institutions
that construct risk profiles of their clients. Many of their questionnaires contain
questions that measure risk tolerance both by the variance of returns and by shortfall
measures.The result of the study shows that Male investors are dominating in
Edelweiss and nearly half of the respondents are unaware about Portfolio activities.
Through this project study, the researcher gained understanding on the
usefulness of analyzing Clients Risk Perception and portfolio Activities and their
preferred style investment and about their expected returns of investment.
A study on Risk Perception and Portfolio Management of Equity investors in Edelweiss
Holy Grace Academy Of Management Studies, Thrissur 105
BIBLIOGRAPHY
BOOKS
� C.R. Kothari “Research Methodology”, Vis wa Prakasan, New Delhi
� M,Y Khan “Financial Services”, 3rd edition Tata McGraw-Hill, New Delhi.
� V, K Bhalla “Management of Financial Services” Anmol Publications Pvt Ltd,
New Delhi.
� Sudhindra Bhat “Security Analysis and Portfolio Management” Excel Book,
New Delhi.
� Punithavathy Pandian “Security Analysis and Portfolio Management”, Vikas
publishing House Pvt Ltd, New Delhi
� Donald E Fischer, Ronald J Jordan, Sixth Edition, Pearson Education
(Singapore) Pte Ltd
WEBSITES
• www.edelweissfin.com
• www.ebsco.com
• www.google.com