JEHANZAIB ALI1093-313140

Department of Management SciencesM. Phil 2nd Semester

Preston university IslamabadPH: +92-3227331734

PORTFOLIO MANAGEMENT

Moving AveragesDefinition & Generation of Signals

The moving average is simply an average. A trader can choose how many periods (measured in minutes, hours, days, weeks, etc.) the moving average should consider

Moving average that is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods.

What is moving average?

When the closing price crosses and moves above the moving average, a buy signal is generated.

When the closing price moves below the moving average a sell signal is generated.

Generation of Signals

Simple Moving Average

Simple Moving Average

Required Rate of ReturnAnd Its Components

Minimum acceptable rate of return on an investment proposal that is comparable with the rate of return obtainable effortlessly and at a low level of risk in the financial markets (such as on a time deposit in a bank).

Required Rate of Return

Risk Premium

I. Business risk – Associated with specific business or industry.

II. Financial risk – Fluctuation in interest rates III. Liquidity risk – The risk of the securities at the

time of liquidityIV. Exchange rate risk – It is the value of one

currency in terms of other currency and faces risk V. Political risk – Instability of political system

Components

Inflation Rate Risk

“The general rise in the prices is termed as inflation”

Inflation is the major risk for the investment as it devalues the investment. An investor must get compensation against inflation risk to get some gain.

Risk & ReturnTrade off

The basic principle states that potential return rises with an increase in risk.

Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns.

Risk-return trade off

Graphical Representation

Structure and Function

SECP

Securities and Exchange Commission of Pakistan (SECP) is the apex regulatory body.

Setup in pursuance of the SECP Act 1997.

SECP regulates insurance companies, non-banking finance companies and private pensions.

An Overview

Organzation's Structure

Securities and Exchange Policy Board

Commision

Chairman

Commisioner SMD

Securities &

Market Division

Market

Supervision

& Capit

al Issue

s department

Policy

Regulation &

Developmen

t Depart

ment

Commisioner CLD

Company Law

Division

Corporatization & Compliance Department

Enforcement Department

Specialized

Company Division

Policy Regulation & Development Department

Supervision Department

Commisioner

Insurance

Insurance Division

Policy Regulation & Development Department

Supervision Department

SDLER

Division

Strategy Development & External Relationship Deparment

legislation & General Council Department

Commissioner OED &

TMFCO

Talent Management

, Finance & Communication Division

HR Training Department

Finance Department

Media & Corporate Communication Department

Organization Effectiveness Division

IT Department

Transformation & Knowledge Department

Complaints & Service Centre Department

Admin Department

Investor Education Department

Listing of companiesMonitoring of Security Exchanges“Stock Exchange" means any person who maintains

or provides a market place or facilities for bringing together buyers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a Stock Exchange

The most important eligibility criteria and requirements for registration of the Stock Exchange is to ensure fair dealing, protection of investors and its sustainable economic viability.

Functions of SECP

High Risk Common Stocks Vs

Low Risk Safe Deposits

Safe & Guaranteed investments bears low risk often backed by Government or insurance.

Investor gets nominal percentage in the compensation for bearing low risk.

Sometimes, investor did not get compensation for even inflation rate.

Low Risk Investments, Safe & Guaranteed

Depends upon investors risk bearing characteristics

High Risk investments generates more income.

Also provides compensation for bearing extra risk.

The basic motive behind bearing more risk is to get more income

High Risk Investments, High Return

Karachi Stock Exchange Vs

Islamabad Stock Exchange

Comparison between movement of stocks

KARACHI STOCK EXCHANGE

Construction & Materials (Cements)

Data from June 5th to June 12th

05-Ju

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06-Ju

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07-Ju

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08-Ju

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09-Ju

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10-Ju

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11-Ju

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12-Ju

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25

28

31

34

Chart Title

Open RateClose RateChange

Stoc

k Pr

ices

Maple Leaf Cement Factory (MLCF)

05-Ju

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06-Ju

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07-Ju

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08-Ju

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09-Ju

n-14

10-Ju

n-14

11-Ju

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12-Ju

n-14

300

350

400

450

Chart Title

Open Rate Close Rate Change

Lucky Cement (LUCK)

Pharma & Bio TechData from June 5th to June 12th

05-Ju

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06-Ju

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07-Ju

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08-Ju

n-14

09-Ju

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10-Ju

n-14

11-Ju

n-14

12-Ju

n-14

170

175

180

185

190

Chart Title

Open RateClose RateChange

Stoc

k Pr

ices

Glaxo Smith Klien (Glaxo)

05-Ju

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06-Ju

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07-Ju

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08-Ju

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09-Ju

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10-Ju

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11-Ju

n-14

12-Ju

n-14

550

560

570

580

590

600

Chart Title

Open RateClose RateChange

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k Pr

ices

Abbot Laboratories (Abot)

ISLAMABAD STOCK EXCHANGE

Banking SectorData from June 6th to June 12th

06-Ju

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07-Ju

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08-Ju

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09-Ju

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10-Ju

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11-Ju

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12-Ju

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15

18

21

24

Chart Title

Open RateClose RateChange

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ices

Askari Bank Limited(AKBL)

06-Ju

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07-Ju

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08-Ju

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09-Ju

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10-Ju

n-14

11-Ju

n-14

12-Ju

n-14

125

128

131

134

Chart Title

Open RateClose RateChange

Stoc

k Pr

ices

Allied Bank Limited(ABL)

FertilizerData from June 6th to June 12th

06-Ju

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07-Ju

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08-Ju

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09-Ju

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10-Ju

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11-Ju

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12-Ju

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180

190

200

210

220

Chart Title

Open RateClose RateChange

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k Pr

ices

Engro Corporation (ENGRO)

06-Ju

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07-Ju

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08-Ju

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09-Ju

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10-Ju

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11-Ju

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12-Ju

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50

53

56

59

62

65

Chart Title

Open RateClose RateChange

Stoc

k Pr

ices

Engro Fertilizer (EFERT)

THANK YOU