Page 349 - DCOM504_SECURITY_ANALYSIS_AND_PORTFOLIO_MANAGEMENT

Security Analysis and Portfolio Management

Notes 14.7 Review Questions

1. Analyse the theory of portfolio revision.
2. What do you think as the need for portfolio revision?

3. Examine various portfolio revision strategies.
4. Critically evaluate various portfolio revision practices.
5. How would you overcome the constraints in portfolio revision.
6. What are the basic assumptions and ground rules of formula plans? Are they realistic?
7. When will the investor make the transfer called for to keep the dollar value of the aggressive
portfolio constant? Will it be made with every change in the prices of the stocks comprising
the aggressive portfolio?
8. The problem of portfolio revision essentially boils down to timing the buying and selling
the securities. Comment.

9. Portfolio revision is not an exact science. Comment.
10. What do you think as the reason behind the dominant Indian Institutional investors not
resorting to active portfolio revision?

Answers: Self Assessment

1. Variable-ratio 2. Constant-ratio

3. formula plans 4. 'active', 'passive'
5. transaction costs, taxes, statutory stipulations
6. fewer 7. predetermined
8. Dollar-Cost Averaging - DCA 9. gainful

10. wash 11. whether, when, how
12. existing mix 13. perfect
14. changes 15. Active

14.8 Further Readings

Books Dicksler, James L. and Samuelson, Paul A., Investment Portfolio Decision-Making,
London, Lexington Books, 1974.
Fabozzi, Frank J, Investment Management, Prentice Hall, Englewood Cliffs, New
Jersey, 1995.
Hester, Donald D. and Tobin, J. (ed.), Risk Aversion and Portfolio Choke, Cowles -
Foundation for Research in Economics, Yale University, Monograph 19.

Lund, Phillips J., Investment: The Study of Economic Aggregates, Edinburgh, Oliver
and Boyd., 1971.

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