Portfolio Performance Evaluation

Topics: Capital asset pricing model, Modern portfolio theory, Investment Pages: 17 (2847 words) Published: January 15, 2013
Portfolio Performance evaluation & Analysis
Portfolio Management(F-407)

Submitted to:
Pallabi Siddiqua
Assistant Professor
Department of Finance
Faculty of Business Studies
University of Dhaka

Submitted by:
Gazi Afsana
Roll: 15-252
4th year 2nd Semester
Department of Finance
Faculty of Business Studies
University of Dhaka

Date of submission: January 13, 2013.

Letter of transmittal
Mrs. Pollobi siddiqua
Department Of Finance,
University Of Dhaka.

Subject: Submission of term paper on “Portfolio Performance evaluation & Analysis”. Dear Madam,
It is an opportunity and great pleasure for us to prepare a term paper on “Portfolio Performance evaluation & Analysis, for our course (F-407) portfolio management according to your order. It was an experience of applying our theoretical knowledge practically to analyze the investment decision. It was also an opportunity for us of thinking ourselves as investor and thus acquiring knowledge of how to deal and take investment decision in corporate business. This gathered and acquired knowledge will help us in our career life in further.

Therefore we appreciate for your cooperation and we will hope you will call upon us with any queries occasioned by this report.
Thanking you and looking forward for receiving your cordial approval of our submission.

Sincerely yours,

Gazi Afsana
ID: 15-252
B.B.A 15th Batch; 4thYear 8th semester
Section: B
Department Of Finance
University Of Dhaka

We are conveying our deepest gratitude and sincere submission to the Almighty ALLAH for giving us the opportunity to accomplish such an enjoyable task of preparing this report in time. We would like to pay our gratitude to all of the people who helped us a lot for the completion of this report before, during, and after the working period. We are thankful to our senior ones who have suggested us how to prepare the report in a proper manner and also helped us in finding out the sources of data. We are especially grateful to our honorable course teacher Mrs. Pallobi siddiqua for giving us valuable suggestions and support to prepare this report. Without her advice and support, it would not be possible for us to prepare this report.

Executive Summary
One of the steps in the portfolio construction process is to evaluate the performance of the portfolio periodically. There are several well- known measures in this purpose of evaluation are used in this report. * Treynor’s performance measure

Treynor was interested in a measure of performance that would apply to all investors regardless of their risk preferences. Building on developments in capital market theory, he introduced a risk free asset that could be combined with different portfolios to form a straight portfolio possibility line.

* Sharpe’s performance measure

Sharpe conceived of a composite measure to evaluate the performance of mutual funds. The measure followed closely his earlier work on the CAPM, dealing with capital market line.

* Jensen’s performance measure

Jensen’s measure is based on CAPM. Expected return and risk free return vary for different periods. Realized rate of return on a security or portfolio during a given time period should be linear function of the risk free rate of return during period, plus a risk premium that depends on the systematic risk of the security or portfolio during the period plus a random error term.

* Attribution Analysis

Portfolio managers can add value to their investors in either of two ways: selecting superior securities or demonstrating superior market timing skills by allocating funds to different asset classes or market segments. It attempts to distinguish which of these factors is the source of the portfolio’s overall performance. As a portfolio manager, I have applied all these measures accordingly.

This report has been prepared to achieve some objectives. These...
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