Investment Theory and Portfolio Management

Investment Theory and Portfolio Management

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Prepared For

Mr. Md. Mohibul Islam

Graduate Business Program

ULAB

FIN-502, Section: 01

Fall, 2014

Date of Submission: December 17, 2014

ABSTRACT

This study targets to take the decision or establishing a portfolio of an emerging ten stock market by investigating the effects of annual report, trading history, and others qualitative factors  on the Dhaka Stock Exchange. In particular, this study focuses on the financial institution of Bangladesh under Dhaka Stock Exchange market. To estimate the conditional portfolio shift before and after these trading history, annual report on each and every company, and others qualitative factors, this study working the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model and supplementary others rules and methodology. The findings of this study indicate that portfolio of overall 10 company stocks in an emerging market such as the Brac Bank, Trust Bank, Shahajalal Bank and others financial institution and the portfolio results result in help us to take the best decision.

INTRODUCTION

Report is prepared based on 10 listed companies of Dhaka stock exchange which is collected and selected from Dhaka Stock Exchange site. It is a difficulty of selecting good investment by considering the tradeoff between risk and return along with the combination of various types of investing for the investor. A rational investor always seeks of minimizing risk and maximizing return that means wealth maximization on his investment in an optimal portfolio. In our learning we have discussed, why we have chosen this 10 company.  For analysis of data we have consider only financial year of 2013. In our study we have calculated the net income, assets, liabilities and equity, return on equity, return on assets, debt to equity ratio, profitability ratio, debt to fixed assets, gross profit margin, standard deviation, variance and average return of each company from their annual report of 2013 and also explained the financial strength of each company. We have also discussed individual stock analysis and portfolio analysis have by using their data. We have tried to five stock portfolio has been made complying by five (05) different companies.

We have chosen 10 companies in three separate sector first category selected from banking sector where we have chosen 4 renowned bank, 2nd sector category selected from financial institution where have 3 financial institution and lastly we have selected three pharmaceuticals. We have choose Banking sector because Bank is now trying to establish itself as the next rising star in South Asia for local foreign investment. The government has implemented a number of policy reforms designed to create a more open and competitive climate for private investment, both foreign and local. And in financial institution has been quick to undertake major restructuring for establishing a market economy, with the major thrust coming from the private sector. Its current development strategy is based on the premise of a controlled economy where private investment is constrained with this end in view. The government has been gradually withdrawing its involvement in this industrial and infrastructure sectors and promoting private sector participation. (A new Horizon for Investment: http://www.discoverybangladesh.com/). Pharmaceuticals are one of the growing opportunity in a Bangladeshi context so we have chosen that 3 category. We have chosen 10 companies by considering high return and low risk characteristics from stocks. Portfolio result depict that combination of five stock in portfolio investment can accelerate portfolio return and can reduce risk. In our report we have also calculate volatility, forecasted volatility, actual volatility using the GARCH model. Considering all calculation, CEO profile, market position, ratio analysis of each company and also reputation we have taken our investment decision.