2.5 INVESTMENT, SECURITY AND PORTFOLIO MANAGEMENT
1. “The most important index in financial market is the stock index, which uses a
set of stock that is representation of the whole market, or a specified sector, to
measure the change in the overall behaviour of the market or sector over a
period of time”. Do you agree or disagree? Give your views by taking the present
situation.
2. The technical analyst places a great deal of importance on supply and demand in
stock pricing. Presumably the fundamental analyst also believe that supply and
demand are important. In what ways do the two groups disagree on the subject?
Give your comments with suitable examples.
3. The efficient market theory has major implications for the practice of portfolio
management. One obvious implication is the determination of superior analyst.
Another is how to carry out the management of portfolios, assuming no success
to superior analysts. Assume that none of the analysts to whom you have
access is superior, what specific investment practices you would implement for
your clients?
4. Reported earnings typically differ, sometimes considerably from economic
earnings. Nevertheless, it is often argued that reported earnings are intended
simply to provide source information to investors about the value of the firm. If
so, might there not be alternative accounting procedures of equal use to
investors? How might one go about evaluating the usefulness of such
procedures?

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