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MADE BY-
B.COM(Hons.)-VIC
PORTFOLIO MANAGEMENT
The following industries have been chosen in the portfolio for the purpose of diversification
Banking, Automobile & Pharmaceutical.
(Figures inclusive of Capital and Revenue Returns)
APPLICATION OF CAPM
Return of portfolio= Risk free retun +(Market return - Irf)*Beta
i.e. R=Irf+(rm-Irf)*Beta
Since,Irf for all the securities in the above portfolio is 0
Hence the formula applied will be-
R= Rm*(B1+B2+B3)
Thus, expected return aas per CAPM:
=15.48*(1.7539+.30+.1674)
=34.38%
This means that the undervalued as the actual return is less than the expected return.
CALCULATION OF BETA OF THE PORTFOLIO
=(0.2279*86.34)/16.32
=1.20
PORTFOLIO EVALUATION
Sharpe’s Ratio-
=(21.07-0)/86.34
=0.251
This portfolio performance is not upto mark as the Sharpe;s Ratio is not high.This mean that
the risk is higher than the return.
Treynor’s Ratio-
=21.07/1.20
=17.55