Portfolio Analysis Essay Example | Topics and Well Written Essays - 1000 words

Portfolio Analysis - Essay Example Logically, then, the risk and return of an individual security should be analysed in terms of how that security affects the risk and return of a portfolio in which it is held. As mentioned in Finance for Non-Financial Managers by Lawrence W Tuller, Diversifiable risk is also known as company-specific, or unsystematic, risk. Market risk is also known as non diversifiable, or systematic, or beta, risk; it is that risk remains after diversification. Diversifiable risk is caused by such random events as lawsuits, strikes, successful and unsuccessful marketing programs, winning or losing a major contract, and other events that are unique to a particular firm. Since these events are random, their effects on portfolio can be eliminated by diversification- bad events in one firm will be offset by good events in another. The riskiness of a portfolios declines as the number of stocks in the portfolio increases. The smaller the correlation coefficient (the movements of two variables with respect to each other), the lower the risk in a large portfolio. If we could find a set of stocks whose correlation were negative or zero, all risk could be eliminated. Consider Stock M with the beta coefficient of 2 i.e. ... This is due to the diversification of risk in a portfolio. (2) Explain carefully how diversification leads to the construction of the Markowitz efficient frontier. Answer: As explained by Eugene Brigham and Gapenski, the computational procedure for determining the efficient set of portfolios was developed by Harry Markowitz and first reported in his article "Portfolio Selection", Journal of Finance, March 1952. Markowitz developed the basic concepts of portfolio theory. With only two assets, the feasible set of portfolios is a point within the curve. However if we increase the number of assets, we would obtain an area under the curve. The points A,B,C and D represent single securities. All other points with in the curve, including its boundaries, represent attainable set. The above Curve boundary from A to D however defines the efficient set of portfolios, which is also called efficient frontier. Portfolios to the left of the efficient set are not possible because they lie outside the attainable set. Portfolios to the right of the boundary line (interior portfolios) are inefficient because some other portfolio would provide either a higher return with the same degree of risk or a lower risk for the same rate of return. Markowitz efficient frontier model. The optimal portfolio for each investor is found at the tangency point between the efficient set of portfolio and one of the investor's indifference curves. This tangency point marks the highest level of satisfaction the investor can attain. The investor's risk/return trade off function is based on the standard economic concepts of utility theory and the indifference curves. Here we have 2 Stock holders. Mr Y and Mr Z. Mr Y is more risk

Academic Skills Essay Example | Topics and Well Written Essays - 1000 words

Academic Skills - Essay Example The aim of education, then, is the full intellectual, moral and spiritual development of the student. Students should acquire discipline and self-mastery, possess mental skills and have a firm character and goodwill. These dispositions are to serve the proper ends of humankind. Clearly students need practical skills to navigate in the everyday world, but the main orientation is toward the ideal, perfect, transcendent realm which truly defines human existence. Planning is one of the academic skills which helps to organize the education and personal schedule. Planning bridges the gap from "where we are" to "where we want to go." It makes it possible for things to occur which would not otherwise happen. In an overall sense, planning is a function that is intellectually demanding and the most basic of all education functions. Planning should logically precede the execution of the educational goals and strategies of organizing, directing, and controlling. It is a function of management wh ich is unique in that it provides direction for all group effort. The purpose of planning is to provide a student with a framework in which decisions can be made which will have an impact on the learning process. A conscious effort to systematize the effort and to manage its evolution is preferable to an unmanaged and haphazard evolution. The basic planning problem is how to allocate the limited resources. The major benefits to be expected from planning include an improved sense of direction for the learning and a student himself, better performance, increased understanding of the learning and its purpose, earlier awareness of problems, and more effective decisions. Assessment allows a student to choose between alternative and find the most reliable and objective information. Assessment, analysis and synthesis are closely connected with planning seen as a process for setting future direction, a means to reduce risk, and a vehicle for training managers. It is also a process for making strategic decisions, a way to develop consensus among top managers, and a means to develop a written long-range plan. Strategic planning can be defined as a method of guiding studnets so that their decisions and actions affect the future of the education process in a consistent and rational manner, and in a way desired by top management. Planning, assessment and restricting helps me to study the course and effective use my time resources and skills. Planning/thinking entails tactica) planning--the planning of those actions to be taken to put strategies into effect. This type of planning answers the question of how to get the job done. It often consists of specific objectives accompanied by short narrative action plans. Assessment may have two diametrically opposed definitions. One is that it is the overall encompassing effort for total planning of a learning process, meaning that planning is merely a portion or "tool" of learning. Planning and restructuring are a part of the day-to-day implementation of an strategic plan. I suppose that I have a good planning and restructuring skills, but need some practice in assessment and analysis. These skills are s core of the effective management of change within the course. It is the implementation of strategies developed to determine a new direction for the personal development through transition, so it may fulfill its responsibilities in a rapidly changing environment. I suppose that planning is not visionary or futuristic thinking, but an example of process versus substance. Planning is the process that creates a balance between what is desired and what is possible. Assessment enables students to distinguish truly important decisions from less important ones