The document discusses portfolio construction and performance evaluation. It begins with an introduction and outlines of macro factor analysis, industry analysis of selected firms, company analysis, portfolio construction outcomes, and portfolio performance evaluation. It then discusses selecting securities from different industries to diversify idiosyncratic risk and maximize returns. Various portfolio strategies are evaluated, including minimizing risk with and without short selling, maximizing returns, and achieving a target return with minimum risk. Portfolio performance is assessed using metrics like Sharpe ratio, Treynor ratio, and alpha.

1. Welcome to my presentation

2. Efficient Portfolio Construction
&
Evaluation of Portfolio Performance

3.  Introduction
 Macro factor Analysis
 Industry analysis of selected firms
 Company Analysis
 Portfolio Construction Outcomes
 Portfolio Performance evaluation
 Conclusion

4.  Portfolio management is the management of combination between
different securities that will produce maximum returns by handling
minimum risk.
 An investor can maximize the returns of a portfolio by choosing securities
with high returns and minimize the risk by diversification of securities. By
using completely diversified portfolio, an investor can eliminate most or all
unsystematic risk. So the goal of an investor when s/he invests in portfolio
of securities is to choose a portfolio with high expected return and low risk.
Portfolio management performs this job.

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2008 2009 2010 2011 2012
Real GDP Growth Rate of
Bangladesh
GDP growth rate and stock market performance in Bangladesh(2008-12)
As we can see from the previous two charts, real GDP growth rate of Bangladesh is
almost stable in fact increasing although at a slow rate but stock market index
(DGEN) fell significantly at the year of 2011 although the economic growth
measured by real GDP growth rate increased from 6% in 2010 to 6.1% in 2011.

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2008 2009 2010 2011 2012
Bangladesh Inflation Rate (CPI)
Inflation and stock market performance in Bangladesh:
In Bangladesh there is an adverse relationship between inflation rate and stock
index as can be seen from the following two graphs. At the year of 2011 inflation rate
increased significantly and at the same time a sharp decline in DGEN is also visible
in that year.

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2008 2009 2010 2011 2012
Lending Interest Rate
Interest rate and stock market performance in Bangladesh:
After comparing Lending interest graph of Bangladesh and DGEN graph from 2008 to
2012 it is found that there is an inverse relationship between lending rate and stock
market. From 2008 to 2009 lending rate is showing decreasing trend whereas DGEN is
showing increasing trend. In the year of 2011 lending rate increased and but DGEN is
showing a decreasing trend at that year..

8. Industry and Business segment Company
Bank
1. DBBL
1. PRIME
Cement 1. HEILDEL
Textile
1. Metro Spinning
1. SQUARE
Engineering 1. Berger Paints
Non-Bank financial institutions 1. IDLC
Pharmaceuticals 1. Beximco Pharmaceutical
Insurance 1. Phoenix Insurance
Real Estate 1. Eastern Housing Ltd
•To perform the job of portfolio
management we choose information on
securities of 10 different companies from 8
different industries. The major focus is to
diversify the portfolio through different
asset classes to diverse away the micro
economic industry specific risk which is the
unsystematic risk
•There are specific reasons behind our
choice of the industries and the companies.
We choose banking, food, cement,
pharmacy, and insurance industries. These
industries are the leading industries of the
financial market of Bangladesh. They
represent most of the part of our financial
sector. All the companies we chosen are A
rated companies.

9. Company
Market Value
(2012)
P/E
(2012)
Turnover
(2012)
DBBL 117
8.64 5322 (mn)
PRIME 37
18.47 1271
HEILDEL 264.7
17.38 7973
Metro Spinning 37.3
19.73 251
SQUARE Textiles 102.8
15.06 5904
Berger Paints 550
26.00 6543
IDLC 91.9
14.04 1496
Beximco Pharmaceutical 55.9
12.89 7620
Phoenix Insurance 58
16.67 336
Eastern Housing Ltd 44
18.87 1871

10. Portfolio Return
0.498502482
Portfolio Excess Return
0.492441183
Portfolio Variance
0.042800963
Portfolio Standard deviation
0.206883937
ΣWi 1
Theta (Θ) 2.380277511
Company Weights
DBBL 0.1
PRIME 0.1
HEILDEL 0.1
SQUARE 0.1
Metro Spinning 0.1
Berger Paints 0.1
IDLC 0.1
Beximco
Pharmaceutical
0.1
Phoenix Insurance 0.1
Eastern Housing Ltd 0.1
Equal Weights:
If I put equal weight in each
of the stock my return will
be 49.85% and risk will be
20.68%. The sharp ratio is
2.38 indicates that I will be
receive 2.38 tk. return for
taking 1 tk. additional risk
Portfolio Return
0.379247
Portfolio Excess Return
0.373186
Portfolio Variance
0.022132
Portfolio Standard deviation
0.148767
ΣWi 1
Theta (Θ) 2.50852
Company Weights
DBBL 0
PRIME 0
HEILDEL 0
SQUARE 0
Metro Spinning 0
Berger Paints 1
IDLC 0
Beximco
Pharmaceutical
0
Phoenix Insurance 0
Eastern Housing Ltd 0
MINIMUM RISK, NO SHORT
SALE:
The above results suggest that I
should not invest any of my fund
in
DBBL,PRIME,HEILDEL,SQUA
RE, Metro Spinning
,IDLC,Beximco Pharma,Phonix
Insurance,eastern housing ltd.
And invest most of my funds
(62%) in Berger Paints if I want to
assume minimum risk (14.87%)
and no short sale. Here the sharp
ratio is 2.50 which mean that I can
achieve 2.50 tk. returns for
assuming 1 tk. additional risk.

11. Portfolio Return
0.006936
Portfolio Excess Return
0.000875
Portfolio Variance
0.114182
Portfolio Standard deviation
0.337908
ΣWi 1
Theta (Θ) 0.002589
Company Weights
DBBL -0.26919
PRIME 0.093929
HEILDEL 0.147066
SQUARE 0.147825
Metro Spinning 0.149545
Berger Paints 0.15
IDLC 0.145725
Beximco Pharmaceutical 0.147771
Phoenix Insurance 0.143761
Eastern Housing Ltd 0.143573
MINIMUM RISK, SHORT SALE:
The above results suggest that if I
want to achieve minimum risk with
short selling approach I have to
short sale the securities of DBBL
and invest most of my funds in rest
nine securities. The sharp ratio of
0.0025 indicates that under this
strategy I can achieve 0.0025 tk.
returns for assuming 1 tk. additional
risk
Portfolio Return
1.78924
Portfolio Excess Return
1.783179
Portfolio Variance
1.629003
Portfolio Standard deviation
1.276324
ΣWi 1
Theta (Θ)
1.397121
Company Weights
DBBL 0
PRIME 1
HEILDEL 0
SQUARE 0
Metro Spinning 0
Berger Paints 0
IDLC 0
Beximco Pharmaceutical 0
Phoenix Insurance 0
Eastern Housing Ltd 0
MAXIMUM THETA, NO SHORT
SALE:
The above result suggests that if I
want to maximize theta (sharp ratio)
without using short selling approach I
have to invest only Prime. Doing so
will generate a return of
approximately 178% at a risk of
127.73%. The sharp ratio is 1.39 here
indicating that I can achieve 1.39 tk.
returns for assuming 1 tk. additional
risk.

12. Portfolio Return
0.532496
Portfolio Excess Return
0.526435
Portfolio Variance
0.121354
Portfolio Standard deviation
0.348359
ΣWi 1
Theta (Θ)
1.511186
Company Weights
DBBL 0.282163
PRIME -0.04224
HEILDEL 0.090799
SQUARE 0.094621
Metro Spinning 0.118641
Berger Paints 0.110875
IDLC 0.080985
Beximco Pharmaceutical 0.096244
Phoenix Insurance 0.082137
Eastern Housing Ltd 0.085779
MAXIMUM THETA, SHORT
SALE:
The above result suggests that if I
want to maximize theta (sharp ratio)
using short selling approach I have to
short sale the securities of
Prime.Doing so will generate a return
of approximately 53.24% at a risk of
34.85%. The sharp ratio is 1.51 here
indicating that I can achieve 1.51 tk.
returns for assuming 1 tk. additional
risk.
Portfolio Return
0.70
Portfolio Excess Return
0.426674
Portfolio Variance
0.030164
Portfolio Standard deviation
0.173679
ΣWi 1
Theta (Θ)
2.456687
Company Weights
DBBL 0.157981
PRIME 0.2
HEILDEL 0.124137
SQUARE 0.123136
Metro Spinning 0.22192
Berger Paints 0.131653
IDLC 0.122637
Beximco Pharmaceutical 0.118851
Phoenix Insurance 0.131905
Eastern Housing Ltd 0.11162
MINIMUM RISK, NO SHORT SALE,
GIVEN RETURN:
The above result suggests that if I want
to minimize risk without using short
selling approach and want to achieve a
return of 70% I have to invest most of
my funds in DBBL, PRIME, SQUARE,
IDLC, BERGER PAINTS, PHOENIX
INSURANCE and Heidelberg Cement and
nothing at popular Life Insurance. The
sharp ratio 2.45 here indicates that I can
achieve 2.45 tk. returns for assuming 1
tk. additional risk.

13. Risk Return
14% 37%
20% 100%
30% 140%
60% 160%
127% 178% 0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
14% 20% 30% 60% 127%
Return
Risk
Efficient frontier

14. Average Portfolio Return(Rp) 0.498502482
Average Market Return(Rm) 0.36
β(portfolio) 0.037005601
Active retun(Rp-Rm) 0.14
Active retun(Rp-Rf) 0.49
Active risk(Rp-Rm) 0.097936044
Active risk(Rp-Rf) 0.3482085
δ(market) 0.309119392
Risk free 0.006061299
CAPM 0.019159014
Treynor ratio 13.30720662
Sharpe 2.380277511
Alpha 0.479343468
M2 0.381851235
information 1.414213562
Adj. Sharp 1.414213562
Maximum theta under equal weight
Above two tables are the output of excels under maximum theta under equal weight. We
see that frow treynor,sharpe and adjusted sharpe ratio,it is not possible to say that my
portfolio has beaten the market or outperformed the market. But based on the results of
alpha,m-square and information ratio,I can say my portfolio outperformed and beat the
market as these ratios are all positives.

15. Average Portfolio Return(Rp) 0.379247
Average Market Return(Rm) 0.36
β(portfolio) 0.039736
Active retun(Rp-Rm) 0.019247
Active retun(Rp-Rf) 0.373186
Active risk(Rp-Rm) 0.01361
Active risk(Rp-Rf) 0.263882
δ(market) 0.309119
Risk free 0.006061
CAPM 0.020125
Treynor ratio 9.391697
Sharpe 2.50852
Alpha 0.359122
M2 0.421493
information 1.414214
Adj. Sharp 1.414214
Minimizing risk under no short sale
Above two tables are the output of excels under Minimizing risk under no short sale. We see that frow
treynor,sharpe and adjusted sharpe ratio, it is not possible to say that my portfolio has beaten the market or
outperformed the market. But based on the results of alpha,m-square and information ratio,I can say my
portfolio outperformed and beat the market as these ratios are all positives.

16. Average Portfolio Return(Rp) 70%
Average Market Return(Rm) 0.36
β(portfolio) 0.022898
Active retun(Rp-Rm) 0.34
Active retun(Rp-Rf) 0.693939
Active risk(Rp-Rm) 0.240416
Active risk(Rp-Rf) 0.490689
δ(market) 0.309119
Risk free 0.006061
CAPM 0.021951
Treynor ratio 30.30555
Sharpe 0.068132
Alpha 0.678049
M2 0.133226
information 1.414214
Adj. Sharp 1.414214
Minimizing risk under given return and short sale
Above two tables are the output of excels under Minimizing risk under given return (70%) short sale. We see
that frow treynor,sharpe and adjusted sharpe ratio, it is not possible to say that my portfolio has beaten the
market or outperformed the market. But based on the results of alpha,m-square and information ratio,I can say
my portfolio outperformed and beat the market as these ratios are all positives.

17.  The entire report shows a simple form of various available technical analysis used in the
capital market. This portfolio can be extended by adding more assets in the portfolio and
get better return with minimize the portfolio risk.
 This report includes the stock dividend, cash dividend, and stock split and right share
price adjustment. It uses some fundamental analysis. It major focuses on diversifications
of portfolio.
 Portfolio performance measures should be a key aspect of the investment decision
process. These tools provide the necessary information for investors to assess how
effectively their money has been invested (or may be invested). Remember, portfolio
returns are only part of the story. Without evaluating risk-adjusted returns, an investor
cannot possibly see the whole investment picture, which may inadvertently lead to
clouded investment decisions.