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Portfolio Theory and Investment Management Essay Examples

Active Investment Management
Let us briefly consider how derivatives may be used to enhance investment returns and manage risk. In general, options can guide portfolio management decisions. Their sensitivity measures can be helpful in determining the impact of portfolio management decisions on the portfolio’s risk characteristics; e.g. see...
Pages: 9 (2250 words) , Research Paper , Finance & Accounting
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The Investment Management
The concentration of Portfolio TheoryAn investor always wants to get the highest return from the investment with a less risk level. But, according to The Portfolio theory if an investor wants a high return on investment then he must take high risk. Through diversification, we...
Pages: 8 (2000 words) , Assignment , Finance & Accounting
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The Relevance of Portfolio Theory and the Capital Asset Pricing Model to an Investor
During the last decade, the development of investment tools available to investors and fund managers worldwide has been extremely rapid; still, there are issues that have not been addressed. The fact that the increase of investment is continuous cannot be used to justify the means...
Pages: 7 (1750 words) , Coursework , Finance & Accounting
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PORTFOLIO THEORY AND CAPM 2012
The correlation coefficient above shows that the investment in Evergreen and Ace is negatively correlated. A shrewd investor always try to invest in companies that are negatively correlate so that the downward trend in the returns of one business can be offset by the increased...
Pages: 8 (2000 words) , Essay , Finance & Accounting
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Optimally Diversified Portfolios, Low-Cost and High-Cost Strategies, Key Aims of Active and Passive Investing
In case of passive investing the charity attempts at least “track” the market which is characterized, say, by the FTSE All-Share Index. If the market is down in a given period, the charity with an indexing strategy will also find investment performance reflecting that decline....
Pages: 8 (2000 words) , Case Study , Finance & Accounting
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Modern Portfolio Theory
The efficient frontier theory argues that portfolios made up of just one asset are inefficient – the better performing portfolios would always turn out to be the ones that are efficiently diversified – except when no other portfolio of assets can deliver a higher expected...
Pages: 6 (1500 words) , Assignment , Business
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Rational Investor and Features of the Optimal Portfolio
Active portfolio managers argue that, by virtue of their superior stock-picking skills, they can do better than any index. Index strategists, for their part, have recent history on their side. In a study that tracked results in a twenty-year period, from 1977 through 1997, the...
Pages: 8 (2000 words) , Coursework , Marketing
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The Theory of Optimal Investment Decision
Payback rule is one of the basic techniques involved in investment decision making. Payback period is the number of years needed to recover the initial investment in a project. The decision rule is that the shorter the payback period the more feasible the project, thus...
Pages: 16 (4000 words) , Essay , Finance & Accounting
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An Effective Allocation of Assets and Liabilities Which Implies Investors Balance and Efficiency of an Investment
Active portfolio management stands a very small chance of outperforming the S&P 500. Because they frenetically buy and sell hundreds of stocks each year, institutional money managers have, in a sense, become the market. Their basic theory is: Buy today whatever we predict can be...
Pages: 10 (2500 words) , Term Paper , Business
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The Relevance of the Capital Asset Pricing Model for Making Investment Decisions
The equilibrium return on risky assets can be determined using the capital asset pricing model. If we consider capital markets to be continuously in equilibrium, with price changes over time reflecting the instantaneous adjustment to new equilibrium, and focus on the market portfolio, that is...
Pages: 8 (2000 words) , Coursework , Finance & Accounting
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The Capital asset pricing model (CAPM) is a very useful model and it is used widely in the industry even though it is based on very strong assumptions. Discuss in the light of recent developments in the area
The supporters of the model postulate that the capital market functions as though the above assumptions were met. The model derives the price to be commanded by any asset to make the investors happy to retain the present market portfolio.Under the CAPM, each person carries...
Pages: 7 (1750 words) , Essay , Finance & Accounting
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Active Portfolio Manager vs Passive Portfolio Manager
Most investors will want to obtain the highest return for the lowest amount of possible risk. However, there tends to be a trade-off between risk and return, whereby larger returns are generally associated with larger risk. Portfolio management helps to bring together various securities and...
Pages: 10 (2500 words) , Coursework , Management
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The Relevance of Portfolio Theory and the Capital Asset Pricing Model in the Equity Markets
Essentially, the Capital Asset Pricing Model establishes a relationship between the risk and the return of an asset, and the premium it commands over the risk-free rate of return. Before one can understand CAPM, however, one must understand the concept of betas. Beta is a coefficient...
Pages: 8 (2000 words) , Coursework , Finance & Accounting
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Stockmarket efficiency and portfolio management
To investigate whether indeed efficient markets affect the decisions of portfolio managers in making investment decisions and the extent and impacts of such influence in earnings performance.Analyses of the impact of efficient stock markets and the EMH have also dominated literature. Bachelier (1900) produced a...
Pages: 22 (5500 words) , Dissertation , Finance & Accounting
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Financial Management: Jackie Jones' Portfolio
The risk of an investment is related to the uncertainty of outcomes. An investment that has an absolutely certain return of 5 percent is considered to be riskless, whereas another investment that has a likely return of 12 percent with a possibility of minus 15...
Pages: 12 (3000 words) , Case Study , Finance & Accounting
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The Capital asset pricing model (CAPM) is a very useful model and it is used widely in the industry even though it is based on very strong assumptions. Discuss in the light of recent developments in the area
Firstly, the model is based on an ineffective assumption; that of a single period time horizon, which makes it inefficient in the evaluation of multi-period appraisal investment. Secondly, the CAPM model is founded on some unrealistic assumptions such as the no taxes or transaction costs....
Pages: 7 (1750 words) , Essay , Finance & Accounting
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CAPM - the Model Furnishing Improved Technique for Integrating Market Info Linked to the Asset Prices
Risk is best adjudicated in the context of a portfolio of securities. Part of the ambiguity about a surety’s return is branched out when security is sorted with other assets in a portfolio. It can be said that diversification is the best for the investors...
Pages: 8 (2000 words) , Term Paper , Finance & Accounting
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How to Invest 10000 Pounds
The single figure called the standard deviation provides a clue as to the risk of a particular stock, and stocks could be compared on the basis of its size. For a two-asset portfolio of a stock, one tries to obtain, firstly, the weighted average of...
Pages: 10 (2500 words) , Research Paper , Finance & Accounting
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The Capital Asset Pricing Model as the Sterile Offspring of Advanced Mathematics
It is quite essential to state that it is impossible for all investors to have the same estimates of the expected values of assets, contrary to the third assumption; or, contrary to the fifth and sixth assumptions, the realities of business transactions is that there...
Pages: 8 (2000 words) , Coursework , Finance & Accounting
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Advanced Valuation of Securities and Bond Trading
The bonds chosen were given a fairly even weight of 25%. The bond that originally had the highest weight was ACGB3 ¼ at 25.23 followed by SPGB 2.15 at 24.96, T2 at 24.95 and finally UKT at 24. The weights adjusted slightly after simulation as...
Pages: 10 (2500 words) , Assignment
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Risk-Return Positioning of Portfolios
The paper developed compares return, risk, and other related factors in the portfolio comprising ‘real estate investment’ and ‘without real estate investment’.Furthermore, the analysis helps to explore that real estate investment in order to maximize the return or add significant risk in a portfolio. Prior to...
Pages: 11 (2750 words) , Term Paper , Finance & Accounting
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The Capital Assets Pricing Model
The introductory part of this paper sets the principal arguments underlying this study. The most important themes needed to be discussed have also been introduced. The remaining part of the paper will be structured as follows. Section two of the paper discusses the theoretical framework....
Pages: 12 (3000 words) , Research Paper , Management
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An analysis of the risk-free rate in the South African capital market
In the last decade, South Africa has made several structural as well as institutional changes to consolidate the capital market in the country. These changes involved consolidation of the government bonds into benchmark bonds and the development of the secondary bond market and the establishment...
Pages: 90 (22500 words) , Dissertation
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Advanced valuation of securities and Bond trading
(MVO) of Harry Markowitz developed in 1952 and the variants that took after constitute a diagnostic way to deal with recognizing ideal resource assignments from the universe of investable securities. The information required for the conventional MVO are the normal rates of return, the dangers...
Pages: 10 (2500 words) , Coursework , Finance & Accounting
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Is the London Stock Market Profitable Platform for Investment
Investment in financial assets is positively related to the expected return. The increase in expected risk indicates a higher return. The modern portfolio theory defines the relation between return on portfolio investment and risk. The Capital Assets Pricing model is used for pricing the financial...
Pages: 11 (2750 words) , Research Paper , Business
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Financial modelling
By investing 100% in the optimal combination of the 2 risky shares, the expected return is 10.0% and the standard deviation is 13.51%. 4. Introduce a risk aversion factor into the model and discuss its effect upon the optimal complete portfolio. The concept of risk aversion plays...
Pages: 6 (1500 words) , Lab Report , Finance & Accounting
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The Risk and Return on a Portfolio of Assets
The key logic is that the investors estimate the overall risk of the investments in the marketplace. Their preference is towards a portfolio of investments rather than single investments. The fundamental theory linking risk and returns are the Capital Asset Pricing Model (CAPM). The CAPM...
Pages: 8 (2000 words) , Assignment , Finance & Accounting
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Venture Capital Valuation Techniques
The model does not appear to adequately explain the variation in stock returns. Empirical studies show that low beta stocks may offer higher returns than the model would predict. Some data to this effect was presented as early as a 1969 conference in Buffalo, New...
Pages: 20 (5000 words) , Assignment , Business
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Finance and Investment: The Dividend Growth Method of Share Valuation
Every company should require to pay dividend out of the earnings. “Companies using the residual dividend policy choose to rely on internally generated equity to finance any new projects. As a result, dividend payments can come out of the residual or leftover equity only after...
Pages: 13 (3250 words) , Assignment , Finance & Accounting
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Financial Management: The Benefits of Diversification of Holdings
It is my that the current portfolio that is under review which is 100% vested in stocks of different shopping malls in Sydney, Australia while at the moment is reaping a good yield will not remain so – especially taking into account the looming credit...
Pages: 8 (2000 words) , Term Paper , Finance & Accounting
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What is the CAPM and of what practical use is it
CAPM and Its Practical Use CAPM refers to the capital asset pricing model, a widely adopted model within the financialfield in order to determine the value of the appropriate rate of return for an asset. Generally speaking, the model has been extensively adopted by portfolio...
Pages: 6 (1500 words) , Essay , Finance & Accounting
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Financial Trading Simulation theory
Likewise, the concept can be used for estimation computations. Other formulas can be branch out from the Markowitz Portfolio Concept’s estimation calculations.Focusing on the branching out of the Markowitz Portfolio Concept, the first model focused on the lessening of requirements needed for the choosing of...
Pages: 8 (2000 words) , Coursework , Finance & Accounting
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Share trading assignment
Technical Analysis Technical analysis involves identification patterns or trends in the movements of stock prices at an earlier stage and then device an appropriate strategy with the objective to benefit from such market movements. The basic concept of technical analysis is identifying trend reversal at a...
Pages: 8 (2000 words) , Assignment , Finance & Accounting
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Energy Derivatives in the UK
The Oil prices have dropped to $69 per barrel and can drop to still lower levels as the tensions between Iran and the U.S aligned west were decreasing as the days pass by. (Financial Times June 2006). From the last three months, the confrontation of...
Pages: 25 (6250 words) , Case Study , Management
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Advanced Investment Theory and Practice
An efficient market hypothesis is being distinguished in three versions depending on the level of information that is available. These versions of an efficient market hypothesis are weak form, semi-strong form, and strong form. Let us look at them and then look at the portfolio...
Pages: 8 (2000 words) , Assignment , Finance & Accounting
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Analysis of Investments of a UK Charity
Investing in some of the funds in overseas markets is an option that is open to the charity’s investment managers. Aside from the possibility that the strength of the sterling gives it added an advantage in view of foreign currency exchange differences, allowing the fund...
Pages: 9 (2250 words) , Assignment , Management
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Moderately Conservative Risk-tolerance Investment Policy
The sound meeting should exist between the corporate management team and the investment bank.  The investment bank then acts as an underwriter and will organize for a network of brokers to sell the bonds or shares to investors. The sound meeting should exist between the...
Pages: 10 (2500 words) , Assignment , Finance & Accounting
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Deciding between Debt and Equity Financing
The underwriting institutions form a syndicate and are headed by the lead underwriter. Together with the company, they determine the characteristics of the issue, such as the size of the float, the coupon or interest rate, the face value, the maturity, and whether they will...
Pages: 9 (2250 words) , Coursework , Finance & Accounting
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Intermediate Financial Management
FCF is not profits, which can be re-invested or given out as dividends. Rather, FCF is the cash not retained nor re-invested in the business. It can be calculated by subtracting costs and investments from revenues: FCF = revenues – costs – investment. The present...
Pages: 6 (1500 words) , Essay , Business
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The Role of International Property Investments in the Global Asset Allocation Process
The UK gilts in which the fund hold 25% with the total amounting to £ 250 million. These investments are the least risky investments and are guaranteed to provide a return. The investments made in these investments are the most secure investments, as these are...
Pages: 9 (2250 words) , Assignment , Business
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Discussion on the CAPM and the APT Models
This article was published in “Portfolio Section”. For his body of work which introduced the concept of risk in portfolio selection, he was awarded the Nobel Prize in economics in 1990. By the 1960s, several financial economists were intrigued by the idea of a systematic...
Pages: 12 (3000 words) , Assignment , Macro & Microeconomics
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The Economics of Financial Markets: Asset Prices Variability and Pricing Model
The main aim of this section is to develop the net present value relationship. The net present value equation is open to misapprehension but if the equation is developed carefully, it provides several in-depth information about evaluation of asset prices as well as enlightens few...
Pages: 14 (3500 words) , Essay , Finance & Accounting
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Advanced Valuation of Securities Trading
To establish the variance and the expected return for a portfolio, the concept developed by Harry Markowitz is employed to calculate the variance of an investment portfolio as the individual stock variances sum and the portfolio stock pair’s covariance (Pratt & Grabowski, 2008). These are...
Pages: 10 (2500 words) , Term Paper , Finance & Accounting
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What is the CAPM and of what practical use is it
IV) It is considered that investors have free access to all available information. If information is not considered as the same for all, the existence of a common efficient frontier with regard to all investors is not possible. V) It is also held that investors have...
Pages: 6 (1500 words) , Essay , Finance & Accounting
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Financial Portfoli analysis & technical analysis ( risk )
Variance analysis is essentially the analysis of mean values. The higher the variance, it is predicted that the average value of the data set is high. In case of the variance calculated for the Emirates National Bank PJS stock and bond, it is seen that...
Pages: 7 (1750 words) , Essay , Finance & Accounting
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Financial management: Short Selling
Short selling itself is a very big risk and is a gamble. It is the selling of stock by a seller on behalf of the broker and is promised to be delivered. It is for short-term use of stock that the trade expects to decline...
Pages: 10 (2500 words) , Coursework , Finance & Accounting
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William Hill Portfolio Diligence
In an acquisition of Stanley Leisure; due diligence need by William Hill is to enable the shareholders with the adequate concept of underlying William acquisition portfolio than the prevailing market allocation of betting services. This gives the company sufficient evidence and confidence to leverage the...
Pages: 22 (5500 words) , Essay , Management
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The Peculiarities of Risk Management
Speculators, on the other hand, intentionally expect to acquire some level of risk that is higher than the prevailing market average, but in the hope and expectation of earning a higher return than the average return on the market. Since investors and speculators are both...
Pages: 8 (2000 words) , Term Paper , Business
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A Winning Stock Market Investment Strategy
I will be using the Price Earnings (PE) ratio of the index as a guideline for the timing of buying or selling. My strategy will be neither entirely passive nor aggressively active, but it will be somewhere in the middle. I will use the PE...
Pages: 7 (1750 words) , Coursework , Marketing
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Empirical Approaches to Asset Pricing
There are various errors in the application of CAPM. Firstly the model may be inadequate in the description of financial market behavior. Another shortcoming of this model is that the betas do not remain stable through time. This creates problems when the value of beta...
Pages: 7 (1750 words) , Case Study , Macro & Microeconomics
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