Investment Analysis

Meaning of investment; The investment process; Real assets and financial assets; Typesof financial assets; Financial intermediaries; Financial markets; Efficient markets; Majorplayers in the financial markets; Ethical issues in investing.

Concept and types of securities markets; Trading of securities; Types of markets; Types of orders; Trading mechanisms; The rise of electronic trading; ECNs; New trading strategies; Globalization of stock markets; Trading costs; Buying on margin; Short sales; Construction of stock market indexes – price-weighted index, value-weighted index, equally-weighted index; Functions of Nepal Stock Exchange; and Role of NepalSecurities Board.

Concepts of risk and return; Measuring investment returns: holding period return, returnsover multiple periods, annualizing rates of return, expected return, time series of return ;Inflation and real rates of return; Measuring risk: variance, standard deviation, coefficientof variation; and Portfolio return and risk of a portfolio of risky and risk-free assets.

Diversification and portfolio risk; Asset allocation with two risky assets; Covariance and correlation; The risk-return trade-off with two-risky-assets; The mean variance criterion; The optimal risky portfolio with a risk-free asset; Efficient diversification with many risky assets; The efficient frontier of risky assets; Choosing the optimal risky portfolio; The Capital Asset Pricing Model: the model, assumptions, implications, and the security market line.

Bond pricing; Bond pricing between coupon dates; Bond pricing in excel; Bond yields:yield to maturity, yield to call, realized compound return versus yield to maturity; Bond prices over time; and Yield to maturity versus holding-period return.

Fundamentals of equity valuations; Intrinsic value versus market price; Dividend discount models: the constant-growth and multistage growth models; Price earnings ratios; and pitfalls in P/E analysis.

Domestic macro economy; Government policy: fiscal policy and monetary policy; business cycles; Economic indicators; Industry analysis: defining an industry, sensitivity to business cycle, sector rotation, industry lifecycles, and industry structure and performance.

Concept; Underlying assumptions; Advantages; Challenges; Technical trading rules and indicators: contrary-opinion rules, follow the smart money, momentum indicators, stockprice and volume techniques.