Page 21 - CAPE Financial Services Syllabus Macmillan_Neat
P. 21
UNIT 1
MODULE 2: PORTFOLIO MANAGEMENT AND INVESTMENT (cont’d)
SPECIFIC OBJECTIVES CONTENT
Students should be able to:
6. describe steps in the portfolio Steps in the portfolio management process
include:
management process;
(a) development of a policy statement;
7. explain the basic assumptions
behind the Markowitz investment (b) analysis of the macro-economic
theory; conditions;
8. *explain the risk–return efficient (c) analysis of industries and sectors;
frontier of risky assets;
(d) micro-analysis of securities and firms;
(e) develop an investment strategy;
(f) implement the plan created; and,
(g) monitoring and updating of the
performance of the portfolio.
Basic assumptions behind the Markowitz
Investment Theory.
(a) Investors consider each investment
alternative as being represented by a
probability distribution of expected
returns over some holding period.
(b) Investors maximise one-period
expected utility and their utility curves
demonstrate diminishing marginal
utility of wealth.
(c) Investors estimate risk on basis of
variability of expected returns.
(d) Investors base decisions solely on
expected return and risk.
(e) Investors prefer higher returns to
lower risk and lower risk for the same
level of return.
Demonstrate the efficient frontier using
graphical representations.
Discuss efficient frontier and investor choice.
CXC A38/U2/16 16
