In the fast growing Indian financial market, there are 23 stock exchanges trading securities. The National Stock Exchange of India (NSE) situated in Mumbai – is the largest and most advanced exchange with 1016 companies listed and 726 trading members.
The NSE is owned by the group of leading financial institutions such as Indian Bank or [...]
If the portfolio includes bank accounts, then buying a security is just a reallocation of cash from the bank account into the bought instrument. This should of course not cause any “jumps” in the total market value of the portfolio, neither should there be any cash flows in or out the portfolio.
In value date based performance [...]
Accrual Basis refers to an accounting method that includes accrued income (=income earned but not yet received) in the portfolio value and also records security transactions, with offsetting receivables and payables, on the trade date rather than on the settlement date. The cash basis accounting method recognizes income only when cash is received and also [...]
Companies may raise capital in the primary market by way of public issue, rights issue or private placement. A public issue is the selling of securities to the public in the primary market. The usual procedure of a public issue is through the fixed price method where securities are offered for subscription to the public [...]
Continuous returns (more precisely: simple rate of returns measured in continuous time) assume that trading can take place anytime and therefore that the market value of the portfolio grows” continuously” over time, and not in “discrete” steps. You can download a spreadsheet illustrating the effect of the number of trading points on the difference between the discrete and [...]
Simple returns (more precisely: simple rate of returns) are basically the percent change in market value of a certain assets over time.
Working with rates instead of market values assumes implicitly that the size of the asset is irrelevant. In an economic interpretation, this means that the investment “technology” exhibits constant-returns-to-scale and that the asset return is a [...]
The most important thing when dealing with investment returns is to bear in mind that what is measured are past returns and that it is very unlikely that the past will be ever repeated in the future.
Nevertheless, investment returns are of great interest in the modern finance world and serve many purposes…
‘Investment returns’ is a product or at [...]
Diversification occurs when different assets make up a portfolio.
The benefit of diversification is risk reduction; the extent of this benefit depends upon how the returns of various assets behave over time.
The market rewards diversification. We can lower risk without sacrificing expected return, and/or we can increase expected return without having to assume more risk.
Diversifying among [...]
This type of risk is magnified by the degree to which the firm relies on fixed operating expenses in producing sales.
In many cases there is not much the firm can do about this type of risk; some industries have more volatile sales and higher fixed operating expense than others.
Operating leverage results when the firm has [...]
It is widely accepted that the major determinant of the required return on the asset (or the rate to be applied to a stream of receipts to capitalize its value) is its degree of risk. Risk refers to the probability that the return and therefore the value of an asset or security may have alternative [...]
