Security Analysis and Portfolio Management Notes
Subject Overview
Security Analysis and Portfolio Management gives in-depth knowledge of analyzing securities and portfolio theory — investment fundamentals and capital markets, fundamental and technical analysis, efficient market theory and portfolio construction, and single-index/
Subject at a glance
4
Units
27
Topics
4
Credits
4
Infographics
Unit-wise Syllabus
4 units — open any unit for detailed topic-wise notes, diagrams and important exam questions
- Nature and scope of investment analysis
- elements and avenues of investment
- approaches to investment analysis
- risk and return concepts and measurement
- financial asset types and information sources
- capital market and public issue procedure
- stock exchange mechanism and development in India
Holding period return
(P1 − P0 + D) / P0
Expected return
Σ (probability × return)
Variance
Σ p (r − E(r))²
Beta
Cov(stock, market) / Var(market)
Study guide
This unit covers investment analysis, avenues, approaches, risk and return measurement, financial assets, the capital market and public issue procedure and the stock exchange mechanism in India. Practise computing expected return and risk.
- Economic analysis
- industry analysis and life cycle
- SWOT analysis for industries
- company analysis and ratio analysis
- technical analysis techniques — Dow theory
- volume/sentiment/confidence indicators
- point-and-figure and bar charting
- 1Economy analysis
GDP, inflation, interest rates
- 2Industry analysis
Life cycle, competition
- 3Company analysis
Ratios, management, earnings
- 4Intrinsic value
Buy if price < value
Study guide
You study economic, industry and company analysis, the industry life cycle, ratio analysis and technical analysis: Dow theory, indicators and charting. Compare fundamental and technical analysis on one stock.
- Random walk theory (weak/semi-strong/strong forms)
- comparison of random walk with technical and fundamental analysis
- portfolio management objectives and construction issues
- portfolio revision and evaluation
- estimating return and standard deviation
- Markowitz risk-return optimization
Portfolio return
Rp = Σ wi Ri
Two-asset risk
σp² = wA²σA² + wB²σB² + 2wAwBρσAσB
CAPM
E(R) = Rf + β (Rm − Rf)
Total risk
Systematic + unsystematic
Study guide
You study the random walk theory and market efficiency forms, portfolio objectives and construction, revision and evaluation and Markowitz optimisation. Practise portfolio return and standard deviation.
- Single index model — total
- market and unique risk
- arbitrage pricing theory and arbitrage portfolios
- two-factor and multi-factor models
- portfolio performance measures
- risk-adjusted evaluation
- market timing and evaluation criteria
Sharpe ratio
(Rp − Rf) / σp
Return per unit of total risk
Treynor ratio
(Rp − Rf) / βp
Return per unit of market risk
Jensen's alpha
Rp − [Rf + βp (Rm − Rf)]
Positive means outperformance
Study guide
You study the single index model, APT, multi-factor models and portfolio performance measures including market timing. Practise Sharpe, Treynor and Jensen measures.
Why Security Analysis and Portfolio Management Matters
Portfolio management is central to equity research, wealth management and mutual fund careers and to NISM, CFA and UGC-NET preparation.
How to Prepare for Security Analysis and Portfolio Management
- Practise portfolio risk-return and performance measure numericals.
- Follow a stock and apply fundamental and technical analysis.
- Learn the forms of market efficiency with examples.
Security Analysis and Portfolio Management: Frequently Asked Questions
What are the forms of market efficiency?
Weak, semi-strong and strong, depending on whether prices reflect past prices, all public information or all information.