The Role of Portfolio Management in an Efficient Market

You have learned that a basic principle in portfolio management is the  diversification of securities. Even if all stocks are priced fairly, each still poses firm-specific risk that can be eliminated through diversification. Therefore, rational security selection, even in an efficient market, calls for the selection of a well-diversified portfolio, providing the systematic risk level that the investor wants. Even in an efficient market investors must choose the risk-return profiles they deem appropriate. The efficient market hypothesis (EMH) states that a market is efficient if security prices immediately and fully reflect all available relevant information.   If the market fully reflects information, the knowledge of that information would not allow an investor to profit from the information because stock prices already incorporate the information.  In an efficient market, no securities are consistently over-priced or under-priced.   While some securities will turn out after any investment period to have provided positive Continue reading

Demand-Pull and Cost-Push Inflation

The term ‘inflation’ is used in many senses and it is difficult to give a generally accepted, precise and scientific definition of the term. Popularly, inflation refers to a rise in price level. Read More: Definition of Inflation and it’s Types Causes and Effects of Inflation The Stages of Inflation Keynesian View of Inflation Effects of Inflation on Different Groups of Society We can distinguish between two kinds of inflation on the basis of their causes, viz., demand-pull and cost-push inflation. Demand-Pull Inflation The most common cause for inflation is the pressure of ever-rising demand on a stagnant or less rapidly increasing supply of goods and services. The expansion in aggregate demand may be due to rapidly increasing private investment or expanding government expenditure for war or economic development. At a time when demand is expanding and exerting pressure on prices,  attempts  are made to expand production. However, this may Continue reading

Meaning and Definitions of Job Satisfaction

Job satisfaction is a feeling that can produce a positive or negative effect toward one’s roles and responsibilities at work and it is important to understand the concept of job satisfaction as there is no single way to satisfy all workers in the workplace. Also, job satisfaction is the positive attitude towards ones job and it is the combination of feelings and beliefs, which include the mental, emotional, and physical domains. Job satisfaction can also be defined as a worker’s emotional response to different job related factors resulting in finding pleasure, comfort, confidence, rewards, personal growth and various positive opportunities, including upward mobility, recognition and appraisal done on a merit pattern with monetary value as compensation. Another definition is that job satisfaction is reflected as an employee’s general affective assessment of himself/herself in the context of his or her job. Some more definitions are listed below; Job satisfaction is defined Continue reading

Digital Transformation and Digital Leaders

Today’s businesses are always more interconnected via various networks and platforms as society in general is experiencing a Digital Transformation, this digitalization exposes businesses to new opportunities but also new threats. As the way business is conducted changes, the figure of leaders that lead organizations through the business ecosystems need to change obtaining a range of skills, abilities and behavior in order to be successful as Digital Leaders. So a question arises: Who is a digital leader? Digital leaders can be found across the organization in the various levels, from operational levels as operational managers, division level as divisional or line managers, executive level as executives such as CEOs, CIOs, or Board levels. Digital leaders are the new leaders that guide, empower and inspire employees throughout all the organization in order to successfully achieve the planned objectives. This are the same old leadership trait but this are executed in a Continue reading

Perfect Competition – Perfectly Competitive Market

Perfect competition is a market situation where large number of buyers and sellers operate freely and commodity sells at a uniform price. In such a situation no seller or buyer has any influence on the market price. In a perfectly competitive market, a firm is the price taker and industry is the price maker. Main Features of Perfect Competition The main features of perfect competition are as follows: There are a large number of buyers and sellers. Each seller must be small and the quantity supplied by any seller must be so insignificant that no increase or decrease in his output can appreciably affect the total supply and the market price. So also, each buyer must be small and the quantity bought by any of the buyers should be so insignificant that no increase or decrease in his purchases can · appreciably affect the total demand and the price. As Continue reading

Formula Plans in Portfolio Management

The investor uses formula plans to facilitate him in making investment decisions for the future by exploiting the fluctuations in prices. The formula plans have sketched the basic rules and regulations for purchasing and selling of investments. The formula plans make the average investors superior to others. These formula plans in portfolio management  are based on the fact that the investors will not have the problem of forecasting fluctuation in stock prices and will continue to act according to formula. So, formula plans are a type of investment strategy that makes use of pre-determined rules for the nature and timing of change in one’s investment portfolio as the market rises or falls. Rules for Formula Plans These plans work according to a methodology which is related for the working of each plan These plans cannot be used for short periods of time. The longer the period of holding the investments, Continue reading