Research Methodology of portfolio management

8/13/2019 Research Methodology of portfolio management

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Introduction and statement of the problem

This topic is substantially important in taking investment decision in the stock market.

Portfolio management will help one in identifying those securities which will help investor to

deploy his funds on those securities which will increase the return for given level of risk or

which will decrease the risk for given level of investment.

By using portfolio management tools like risk-return analysis, Markowitz model, sharp

model here we have to identify those securities which will maximize our return on funds

deployed.

Short Literature Survey

Portfolio management

Portfolio management is the professional management of varioussecurities (shares, bonds

and other securities) andassets (e.g.,real estate)in order to meet specified investment goals

for the benefit of the investors. Investors may be institutions (insurance companies, pension

funds, corporations, charities, educational establishments etc.) or private investors (both

directly via investment contracts and more commonly viacollective investment

schemes e.g.mutual funds orexchange-traded funds).

Each of the investment avenues has their own risk and return. Investor plans hisinvestment as per this riskreturn profile or his preferences while managing his portfolio

efficiently so as to secure the highest return for lowest possible risk. This in short is the

portfolio management.

Portfolio management is the process of encompassing many activities of investment

in assets and securities which includes planning, supervision, timing, rationalization, etc. inselection of securities to meet investors objectives.

Investment management is the another word which can be used for portfolio

management
http://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Mutual_fundshttp://en.wikipedia.org/wiki/Exchange-traded_fundhttp://en.wikipedia.org/wiki/Exchange-traded_fundhttp://en.wikipedia.org/wiki/Mutual_fundshttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Securities


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Types of risks

1. Systematic risk: -

Systematic risk is non diversifiable& is associated with the securities market as well as the

economic, sociological, political, & legal considerations of prices of all securities in theeconomy. The affect of these factors is to put pressure on all securities in such a way that the

prices of all stocks will more in the same direction.

2. Unsystematic Risk: -

The importance of unsystematic risk arises out of the uncertainty surrounding of particular

firm or industry due to factors like labour strike, consumer preferences and management

policies. These uncertainties directly affect the financing and operating environment of the

firm. Unsystematic risks can owing to these considerations be said to complement thesystematic risk forces.

Risk Return relationship

The higher the risk taken, the higher is the return. But proper management of risk involves

the right choice of investments whose risks are compensating.

GOVT. Bond

Debentures /Bonds

Insurance companies/post office service

Fixed Deposits of companies

Mutual funds

Equity of blue chip companies

Risk

Equity of venture capital funds

Return

Risk free Return


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RESEARCH DESIGN

The research design of this project is descriptive research. Because, here we have to offer a

solution for the problem i.e. to construct an optimum portfolio. As we are here doing our

research based on secondary data which are already available and we are not needed to

collect those data, so we use descriptive research design.

RESEARCH METHODOLOGY

We have use secondary data for research on this topic. We have collected data for the

period of January 2012 to December 2012. These data are in the form of share prices of

different company and balancesheet of different companies. We have used those data in

the selection of the company for investment and calculating risk and return for the same

companies according to Markowitz and sharp model. The different secondary sources

have been use for collection of data for prices of share and financial performance of

various companies. Those are

www.bseindia.com

www.moneycontrol.com

www.in.com

Population:- The population in this project includes all companies in the capital goods and

sugar sector. Price of all these companies in the BSE is my population.

Sampling method:- The sampling method which We have used is non-probabilistic

Judgmental sampling. Because, all sectors for investment are selected by researchers

judgment in order to invest scarce funds. And to select the companies in this sector We have

use EPS (earning per share) as the performance criteria for these companies. And the

companies with the more EPS are selected for further analysis in portfolio.

Data analysis:-Analysis is an important part in the project. Statistical tools We have used

are mean, standard deviation, variance, co relation, regression, Beta coefficient and standard

error for various securities. We have used Markowitz model and sharp model in portfolio

management to decide the optimum portfolio.
http://www.bseindia.com/http://www.bseindia.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.in.com/http://www.in.com/http://www.in.com/http://www.moneycontrol.com/http://www.bseindia.com/


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TIME & BUDGET

We have selected time period of January 2012 to December 2012 to collect data for our

research.

REASON FOR TAKING UP THE PROJECT

As we know there are many investment avenues where one can invest and one can get

maximum out of their scarce fund, and shares are one of the most attractive and risky

investment option that one can consider for investment.

So, here by analysing risk and return in 3 sectors namely IT, banking and pharmaceutical

sector. We are trying to find out risk and return in every sector and trying to find out which

sector will give us maximum return.

So, basically we are suggesting the investor best company to deploy their fund in the given

sectors so that they can maximize their return at minimum risk.

LIMITATION OF THE PROJECT:-

As We have collected prices of the share for the year 2012. So, prices of share for thedifferent period may be different. So, decision made out of this analysis cant be

applicable for other time period for investment.

We have selected only 3 sector namely, information technology, banking and pharmasector. So, there may be other sectors which are more profitable than these sectors. So in

reality one can select other sectors in order to maximize the return. So, practically it is not

possible to do investment in only certain sector. We have to take into consideration each

and every sector of economy for investment.

And due to our lake of experience in this field, it may be possible that analysis made byme may not be 100% correct and accurate.

FURTHER SCOPE OF STUDY:-

One can further study in this field by selecting different sectors for investment. And one can

evaluate securities using different portfolio tools for investment of scarce funds.


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Research Methodology of portfolio management

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