Investment Management Theories

[Student name]
[Student number]
[Investment Management]
Word count: [...insert word count here...]
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Executive summary
The focus of the assessment is to identifying the viable investment
theories that can be used by investors for formulating their portfolio. In
addition, the measures that investor can use for improving the portfolio
returns and reduce the risk from their investment is also discussed. Using
Black Scholes model for detecting the prices of both call and put options
has been calculated. The information regarding daily mark to market
settlement has also been calculated, which is used by the stock market to
credit or debit the cash flows from the investment exposure. Lastly, the
discussion regarding risk adjusted return model of Morningstar and other
portfolio valuation calculations has been conducted.
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Table of contents
1. Introduction:.........................................................................................4
2. Conversing on Single-index model and CAPM although stating any
updates on the model:.............................................................................4
3. Analytically evaluating the Fama-French (FF) three-factor model and
arbitrage pricing theory (APT):.................................................................6
4. Highlighting the consequences of portfolio management perspective
on the basis of asset choice from cyclical and defensive industries:.......7
5. Calculating both the call and put option prices using the appendix
data:.........................................................................................................8
6. Calculating the delivery for the gold futures:.......................................9
7. Computing the daily mark-to-market settlements for each contract
held by the short position:......................................................................10
8. Reviewing the fund’s portfolio performance by using Treynor
measure, the Sharpe ratio, Jensen’s alpha, and the Information ratio,
while discussing about the Morningstar risk adjusted return model:.....11
4. Conclusion..........................................................................................13
References.............................................................................................14
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1. Introduction:
The report directly focuses on identifying the viable investment
theories that can be used by investors for formulating their portfolio and
generating adequate returns with low risk contribution. The report
features all the relevant discussion on Single index model, Fama French
model, Capital asset pricing model and Arbitrage pricing model. Moreover,
the discussion also focuses on the perspective of portfolio manager when
making adequate investment decisions on cyclical and defensive stocks.
Further elaboration is conducted on the mark to market settlement
calculations that are used by investors having a short or long exposure to
the futures market. Lastly, the discussion on the overall return capability
of an investment portfolio is conducted by utilising different levels of
calculations and adequate focus is provided on the risk adjusted return
model used by Morningstar.
2. Conversing on Single-index model and CAPM although stating
any updates on the model:
Capital Asset Pricing model:
The formula in the above figure provides information regarding the
capital asset pricing model, which was developed during the period of
1964. In addition, the formula was extended from 1965 to 1972. The
formula is mainly based on the risk and return attributes of a stock in
comparison with the risk-free rate and market return. Thus, by utilising
the formula investors can understand and grasp the concept of risk-return
measurement, where it states that with higher risk, return from a
particular stock eventually increases and vice versa. The investors using
the formula can appropriately identify the returns on both long term and
short-term data, as it would directly analyse the risk that is associated
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