StudentShare solutions
Triangle menu

Portfolio Management - Essay Example

Nobody downloaded yet

Extract of sample
Portfolio Management

This obviously shows that this theory is not entirely correct. The theory further interpreted shows that investors who thoroughly analyse the market are wasting their time. This theory was coined from the belief that, since the market was often efficient, then it was always efficient. This is however, not always true (Hagstrom, R. 2001, 158). The efficient market theory by Eugene Fama bases its argument on a number of assumptions. First is that all investors rationally seek to maximize the value of their investments. This means that the information that investors receive on their stock investments can make them react randomly either by overreacting or vice versa. This goes to say that they cannot be predicted or exploited thereof for the purpose of making a profit. Secondly, investors have easy and free access to information and can easily buy or sell stocks without breaking sweat. Third is that, all investors in the stock market are in it to make money. This is true to some extent. Based on these assumptions, one can conclude that all the information that people have that can affect stock prices is irrelevant since it has already affected the price (Hough, J. 2008, 26 -27). Similarly, if the stock price at any one time accurately reflects the value of the company then, stock traders cannot time their trades in a way to take advantage of inside information. Efficient market theory also shows that companies cannot manipulate their accounts to take advantage of investors by manipulating their stock prices. However, market dynamics and IT employ ordinary people who work in various companies neither of whom are consistent or efficient. Nevertheless, cases of companies manipulating their books and insider trading are evident in stock markets around the world (Studymode. 1999, 1). An academic spends time testing viable approaches to the market and comes up with conclusions that a practical player in the stock market will most likely differ with. This is because an individual practicing in the market will find completely different ways of benefitting from the market. A successful practicing trader in the market is characterized as practical, rational, able to keep their emotions in check and profit oriented (Schwager, J. 2008, 42). There a number of ways that one can benefit from an inefficient market. One is as simple as buying the under-priced stocks and short the overpriced ones. It is obviously a much more complex undertaking than it seems. Timing and information is any investor’s best asset when it comes to this. As everyone is scrambling to buy stocks and bonds from large companies, one can take this opportunity to target the smaller upgraded companies that others seem to overlook. The stock and bond prices for these companies are sure to be at a bargain since there are fewer players in this pool. One of the most overstated but true investment rules that few seem to follow is to diversify. Diversifying one’s investment portfolio is a sure way to reduce the risk of losses all the while increasing the chances of good returns on investment. Diversifying however does not just mean investing randomly in different companies. Real application of diversification in investments refers to owning stocks or bonds spread amongst an array of sectors in the market. Diversification does not cost the investor anything and is referred to as free insurance in the ...Show more


Efficient Market Theories According To Warren Buffett Name Institution Weaknesses of the Efficient Market Theory Anyone who invests in the stock market expects to have a return on the principal invested. Assuming that the efficient market way of thinking is correct, then no individual, group or organization can ever expect to outperform the stock market, except by random chance…
Author : kassulkekeaton
Portfolio Management essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Portfolio Management"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Portfolio Management
The portfolio formation is characterized by the attainment of optimal returns and diversification of risk. The main strategy in the formation of portfolio is the preservation of capital. However, the strategy of preservation of capital does not mean that one should exit his position of asset holdings in the event of incurring losses.
4 pages (1000 words) Essay
Customer Portfolio Management
Customer Portfolio Management [Student’s Name] [Course Title] [Instructor’s Name] [Date] Customer Portfolio Management Introduction Customers are considered as an asset for a business, because; these customers are the one who influence policy and business strategy development.
10 pages (2500 words) Essay
Portfolio Management Master Essay
Thus the return generating process is frequently impacted on by factors like oil price movements and varying interest rates. (Basu 663). Therefore the APT will have many roles. First, in the management of priced portfolio and unpriced portfolio. Since returns on security has got both general and minor factors that affect it, it has been noted that there will be minimal effects as portfolio's become bigger and as far as assets returns are concerned.
4 pages (1000 words) Essay
Portfolio management
An investor may hold a collection of investments to derive future payments that will compensate the investor for the time the funds are committed, the expected rate of inflation, and the uncertainty of the future payments. The "investor" can be an individual, a government, a pension fund, or a corporation.
7 pages (1750 words) Essay
Portfolio Management
That fund managers' characteristics simultaneously determine their portfolio return performance and risk as well as their own compensation is not surprising; yet, earlier studies have not accounted for this simultaneity. For example, it follows from human capital theory that managers with greater human capital (intelligence, etc.) should produce better performance and receive better compensation.
21 pages (5250 words) Essay
Portfolio Management Plan
The performance of the organization would be on the positive side with the services of Employee X. Employee X is characterized as being satisfied with his job. Employee Y needs to be constantly monitored after assigning any task and all guidelines need to
2 pages (500 words) Essay
Project Portfolio Management
This development has brought about the concept of project management and other related aspects, with organizations giving due consideration to proper effective and efficient ways of managing particular
3 pages (750 words) Essay
Portfolio management
In 2014, Qatari economy has reached its target of becoming one of the stable economies of the world. One of the major reasons behind the blooming economy of Qatar is its reliance over natural gas. Economic management of Qatari market has enabled the
15 pages (3750 words) Essay
Portfolio management

The author states that portfolio managements involve understanding the various investment alternatives and selecting the ones that best achieve the overall financial goals and strategy. Portfolio management has in recent years become a popular concept in managing business and projects in many organizations.

8 pages (2000 words) Essay
Project Portfolio Management
High risks are carefully balanced with the conservative ones and the blend monitored closely to ensure projects are on course and
1 pages (250 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Contact Us