SECURITY ANALYSIS

AND
PORTFOLIO MANAGEMENT
DR N.N.SENGUPTA

NATURE OF INDIAN STOCK MARKET

Indian Stock Markets are one of the oldest in Asia.
Its history dates back to nearly 200 years ago. The earliest records of security
dealings in India are meagre and obscure.
Indian stock markets have not only grown just in number of exchanges, but also in
number of listed companies and in capital of listed companies. The remarkable
growth after 1985 can be clearly seen, and this was due to the favouring government
policies towards security market industry.
Trading in Indian stock exchanges are limited to listed securities of public limited
companies. They are broadly divided into two categories:
Specified Securities (forward list)
Non-Specified Securities (cash list).

Two types of transactions can be carried out on the Indian stock exchanges:
Spot Delivery Transactions "for delivery and payment within the time or on
the date stipulated when entering into the contract which shall not be more
than 14 days following the date of the contract" .
(b) Forward Transactions "delivery and payment can be extended by further
period of 14 days each so that the overall period does not exceed 90 days
from the date of the contract".
The nature of trading on Indian Stock Exchanges are that of age old
conventional style of face-to-face trading with bids and offers being made
by open outcry. However, there is a great amount of effort to modernize the
Indian stock exchanges in the very recent times.

TYPES OF SHARES
Shares in the company may be similar i.e they may carry the same rights and
liabilities and confer on their holders the same rights, liabilities and duties.
There are two types of shares under Indian Company Law :1.EQUITY SHARES : That part of the share capital of the company which are
not preference shares.
2.PREFERENCE SHARES: Shares which fulfill the following 2 conditions.
It carries Preferential rights in respect of Dividend at fixed amount or at fixed
rate i.e. dividend payable is payable on fixed figure or percent and this dividend
must paid before the holders of the equity shares can be paid dividend.
It also carries preferential right in regard to payment of capital on winding up or
otherwise. It means the amount paid on preference share must be paid back to
preference shareholders before anything in paid to the equity shareholders. In
other words, preference share capital has priority both in repayment of dividend
as well as capital.

TYPES OF PREFERENCE SHARES

1.CUMULATIVE OR NON CUMULATIVE : A non-cumulative preference shares
gives right to fixed percentage dividend of profit of each year. Cumulative
preference shares however give the right to the preference shareholders to
demand the unpaid dividend in any year during the subsequent year or years when
the profits are available for distribution .
2.REDEEMABLE OR NON REDEEMABLE SHARES: Redeemable Preference
shares are preference shares which have to be repaid by the company after the
term of which for which the preference shares have been issued.
Irredeemable Preference shares means preference shares need not repaid by the
company except on winding up of the company. However, under the Indian
Companies Act, a company cannot issue irredeemable preference shares.
3.PARTICIPATING OR NON PARTICIPATING PREFERENCE SHARES :
Participating Preference shares are entitled to a preferential dividend at a fixed
rate with the right to participate further in the profits either along with or after
payment of certain rate of dividend on equity shares. A non-participating share is
one which does not such right to participate in the profits of the company after the
dividend and capital have been paid to the preference shareholders.

BONDS AND MONEY MARKET SECURITIES

A security is a fungible, negotiable instrument representing financial value.
Securities are broadly categorized into debt and equity securities. The company
or other entity issuing the security is called the issuer.
Securities may be represented by a certificate or, more typically, by an electronic
book entry interest. They include shares of corporate stock or mutual funds,
bonds issued by corporations or governmental agencies, stock options or other
options, limited partnership units, and various other formal investment
instruments that are negotiable and fungible.
A Bond is a debt security, in which the authorised issuer owes the holders a debt
and is obliged to repay the principal and interest at a later date, termed maturity..
A bond is simply a loan, but in the form of a security, although terminology used
is rather different. The issuer is equivalent to the borrower, the bond holder to the
lender, and the coupon to the interest. Bonds enable the issuer to finance longterm investments with external funds.

PRIMARY AND SECONDARY MARKET

Securities generally have two stages in their lifespan.

The first stage is when the company initially issues the security directly from its
treasury at a predetermined offering price. This is a PRIMARY MARKET offering. It
is referred to as the initial public offering (IPO). Investment dealers frequently buy
initial offerings on the primary market and resell the securities on the SECONDARY
MARKET.
In the primary market, securities are offered to public for subscription for the
purpose of raising capital or fund. Secondary market is an equity trading avenue in
which already existing/pre- issued securities are traded amongst investors.
Secondary market could be either auction or dealer market. While stock exchange
is the part of an auction market, Over-the-Counter (OTC) is a part of the dealer
market

MAKERS OF THE MARKET

A "market maker" is a firm or a person that stands ready to buy and sell a
particular stock on a regular and continuous basis at a publicly quoted price.
Market makers that stand ready to buy and sell stocks listed on an exchange,
such as the New York Stock Exchange, are called "third market makers." Many
OTC stocks have more than one market-maker.
Most stock exchanges operate on a matched bargain or order driven basis. In
such a system there are no designated or official market makers but market
makers nevertheless exist. When a buyer's bid meets a seller's offer (or vice
versa) the stock exchange's matching system will decide that a deal has been
executed.

NSE- NATIONAL STOCK EXCHANGE

The National Stock Exchange was incorporated in 1992 by Industrial
Development Bank of India, Industrial Credit and Investment Corporation of
India, Industrial Finance Corporation of India, all Insurance Corporations,
selected commercial banks and others.
Trading at NSE can be classified under two broad categories:
(a) Wholesale debt market and
(b) Capital market.
Wholesale debt market operations are similar to money market operations institutions and corporate bodies enter into high value transactions in financial
instruments such as government securities, treasury bills, public sector unit
bonds, commercial paper, certificate of deposit, etc.
There are two kinds of players in NSE:
(a) trading members and
(b) participants.

Recognized members of NSE are called TRADING MEMBERS who trade on

behalf of themselves and their clients.
Participants include trading members and large players like banks who take
direct settlement responsibility.
NSE brings an integrated stock market trading network across the nation.
Investors can trade at the same price from anywhere in the country since
inter-market operations are streamlined coupled with the countrywide access
to the securities.
Capital market being one of the major source of long-term finance for
industrial projects, India cannot afford to damage the capital market path. In
this regard NSE gains vital importance in the Indian capital market system.

OVER THE COUNTER EXCHANGE OF INDIA (OTCEI)

OTCEI - was created in 1992 by country's premier financial institutions - Unit Trust
of India, Industrial Credit and Investment Corporation of India, Industrial
Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of
India, General Insurance Corporation and its subsidiaries and CanBank Financial
Services.
Trading at OTCEI is done over the centres spread across the country. Securities
traded on the OTCEI are classified into:
LISTED SECURITIES - The shares and debentures of the companies listed on the
OTC can be bought or sold at any OTC counter all over the country and they
should not be listed anywhere else.
PERMITTED SECURITIES - Certain shares and debentures listed on other
exchanges and units of mutual funds are allowed to be traded.
INITIATED DEBENTURES - Any equity holding atleast one lakh debentures of a
particular scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges.

That is, certificates of listed securities and initiated debentures are not traded at
OTC.
ADVANTAGES OF OTC EXCHANGE NETWORK:
OTCEI has widely dispersed trading mechanism across the country which
provides greater liquidity and lesser risk of intermediary charges.
Greater transparency and accuracy of prices is obtained due to the screenbased scripless trading.
Faster settlement and transfer process compared to other exchanges.
In the case of an OTC issue (new issue), the allotment procedure is completed
in a month and trading commences after a month of the issue closure, whereas
it takes a longer period for the same with respect to other exchanges.

INTERCONNECTED STOCK EXCHANGES (ISE)

ISE endeavours to consolidate the small, fragmented and less liquid markets into
a national-level, liquid market by using state-of-the-art infrastructure and support
systems.
The trading, settlement and funds transfer operations of ISE are completely
automated and state-of-the-art systems have been deployed. The communication
network of ISE, which has connectivity with over 400 trading members and is
spread across 46 cities.
FEATURES:
Skilled and experienced manpower :
ISE have experienced and professional staff, who have wide experience in Stock
Exchanges/Capital market institutions.
Aggressive pricing policy:
Aggressive pricing policy for the various products and services offered by it. The
aim is to penetrate the retail market and strengthen the position, so that a wide
variety of products and services having appeal for the retail market can be offered
using a common distribution channel.
Vibrant Subsidiary Operations
ISS, the wholly-owned subsidiary of ISE, is one of the biggest Exchange

BOND VALUATION
It is the process of determining the fair price of a bond. As with any security or
capital investment, the fair value of a bond is the present value of the stream of
cash flows it is expected to generate.
Bond: When a company (or government) borrows money from the public or
banks (bondholders) and agrees to pay it back later.
Par Value: The amount of money that the company borrows.
Coupon Payments: This is like interest. The company makes regular payments
to the bondholders, like every 6 months or every year.
Indenture: A written agreement between the company and the bond holder. They
talk about how much the coupon payments will be, and when the money (par
value) will be paid back to the bondholder.
Maturity Date: Date when the company pays the par value back to the
bondholder.
Market Interest Rate: This changes everyday.

The present value = The present value + The present value

Of a bond
of the coupon
of the par value
payments
(time value of money)
(an annuity)

There are three types of Duration that may be calculated for a bond and/or
portfolio:
Macaulays (also known as Modified Duration)
Effective Duration (also known as Option-Adjusted Duration)
Duration-to-Worst.

Macaulays (Modified) Duration The approximate percentage change in a

bonds price given a 1% change in its yield-to-maturity . The Macaulays
duration formula is based on a pre-determined set of principal and interest
cash flows computed to the bonds final maturity date and does not recognize
that those cash flows could be affected by changes in interest rates, including
the exercise of one or more embedded options (calls, puts, optional
prepayments, floating rate coupons, including any reset caps or floors, etc.).

2. Duration-to-Worst the approximate percentage change in a bonds price

given a 1% change in its yield-to-maturity or its yield-to-call, whichever is
lower. Duration-to-Worst is the same as Macaulays duration except the predetermined set of principal and interest cash flows are based on either the
final maturity date, or a call date within the bonds call schedule, whichever
would result in the lowest yield to the investor i.e., the Yield-to-Worst. (Note
that for puttable bonds, one would use a duration-to-best computed from
cash flows to the maturity date or to the put date, whichever results in the
highest yield to the investor).
-

3. Effective Duration the average percentage change in a bonds price,

based on upward and downward parallel shifts in the underlying term structure of
interest rates (typically the Treasury spot curve). By determining what the bonds
price would be, given higher/lower interest rate environments, the effective
duration measure reflects the increasing or decreasing likelihood of any option
exercise, including calls, puts, changes in prepayment speeds for mortgagebacked securities, and the higher probability of encountering any rate caps/floors
for securities with adjustable coupons.

PORTFOLIO MANAGEMENT
Definition:
CREATION AND MANTAINANCE OF AN INVESTMENT.
IT IS A COMPLEX PROCESS WHICH TRIES TO MAKE INVESTMENT
ACTIVITIES MORE REWARDING AND LESS RISKY
DEALS WITH SECURITY ANALYSIS, PORTFOLIO ANALYSIS, PORFOLIO
SELECTION, PORTFOLIO REVISION, AND PORTFOLIO EVALUATION.
In finance, a portfolio is a collection of investments held by an
institution or an individual. Holding a portfolio is part of an investment
and risk-limiting strategy called diversification. By owning several
assets, certain types of risk (in particular specific risk) can be reduced.
The assets in the portfolio could include stocks, bonds, options,
warants, gold certificates, real estate, futures contracts, production
facilities, or any other item that is expected to retain its value.

INVESTMENT
It is an activity that is engaged by people who
have savings .
Investment involves employment of funds with a
aim of achieving additional income or growth in
values.
Critical point of investment is it involves time
factor i.e. reward is associated with waiting.
Expectation of return ia an essential element of
investment.
Expectation of returns can be higher or lower

CHARACTERISTICS

RETURN
Investment are made with a primary objective of deriving a return

RISK
Risk is dependent upon following factors
Longer the maturity period, higher the risk
Lower the credit worthiness of the borrower, the higher the is the risk
Risk vary with the nature of investment.

SAFETY
Safety implies the certainty of return of return on capital without the loss of
money or time.

LIQUIDITY
An investment which is easily saleable or marketable without loss of money
and without loss of time is said to possess liquidity.

CATEGORIES OF INVESTMENT

Fixed income investment

Public equities
Real return bonds
Private equities
Buy out
Venture capital
Infrastructure
Rate Setting
Rate Setting tied to service delivery levels
Non-regulated assets

Real estate
Absolute Return Strategies
Derivatives

PORTFOLIO ANALYSIS

In order to find out the efficiency of portfolio i.e a portfolio is evaluated only in
terms of expected return and risk it bears.
Thus this process of determining the expected return and risk of different
portfolios is a primary step in portfolio management , which is designated as
portfolio analysis.

PORTFOLIO ANALYSIS EXPECTED RETURN

An investor , need to decide upon on securities eligible for selection in the
portfolio. The eligibility of a security is determined on the bases of returns it can
generate.
These returns are known as expected rate of returns which is simply weighted
average of the return of the individual securities held in the portfolio.
The weight applied to each return is the
r fraction of the portfolio invested in that
security
e.g. Consider a portfolio of two equity shares P and Q with expected returns of
15 and 20 percent.
If 40 percent of total funds is invested in shares P and the remaining 60
percent , in share Q then the expected portfolio return will be ;
( 0.40 15 ) + ( 0.60 20 ) = 18 percent.
Formulae ;

rp xi ri
i 1

PORTFOLIO ANALYSIS RISK

The variance or standard deviation of an individual security measures the
riskiness of a security .
Risk of a portfolio of securities is calculated on the bases of riskiness of each
security within the context of the overall portfolio . This depends on their
interactive risk i.e. how the returns of a security move with the returns of
other securities in the portfolio and contributes to the overall risk of the
portfolio.
COVARIANCE is a statistical tool used to indicate interactive risk of a security
relative to others in a portfolio of securities.
The covariance is a measure of how returns of two securities move together.
If the returns of two securities move in the same direction consistently the
covariance is positive. If the returns of the two securities move in the
opposite direction consistently the covariance would be negative.

Cov xy

where

[R
i 1

R x ][ R y R y ]
N

Cov xy

covariance between x and y

return of security x

return of security y

expected or mean return of security x

=
=

expected or mean return of security y

number of observations

Rx

Ry

Rx

Ry
N

PORTFOLIO ANALYSIS DIVERSIFICATION

The process of combing securities into a portfolio is known as diversification.
Diversification aims at reducing the total risk without sacrificing portfolio return.
To understand the mechanism and power of diversification, it is necessary to
consider the impact of covariance or correlation on portfolio risk more closely.
We shall examine three cases :
1. When security returns are perfectly positive correlated
2. When security returns are perfectly negatively correlated and
3. When security returns are not correlated.

PORTFOLIO ANALYSIS
MARKOWITZ MODEL
The proper goal of portfolio construction would be to generate a portfolio that
provides the highest return and lowest risk. Method of selecting such a optimal
portfolio is known as MARKOWITZ MODEL ( HM MODEL).
It analyses the various possible portfolio of a given number of securities and
helps in selection of the best or most efficient one. HM model shows how an
investor can reduce the risk i.e the standard deviation of the portfolio returns by
choosing those securities that do not move exactly together.
It is also know as Mean- deviation model .
Assumptions:
an investor is basically risk averse and the risk of a portfolio is estimated
on the basis of variability of returns.
the decision of the investor regarding selection of portfolio is made on
the bassis of returns and risk of the portfolio.
an investor attempts to get maximum return from minimum risk .

CAPITAL ASSET PRICING

MODEL
CAPM attempts to measure the risk of a security in the portfolio sense. It
considers the required rate of return of a security on the basis of its
contribution to total portfolio risk.
The core idea of CAPM is that only undiversifiable risk is relevant to the
determination of expected return on any asset.

MOTIVATION FOR PARTIONING OF RISK :

The total risk of a portfolio is divided into systematic and unsystematic
risk. The latter is eliminated by more and more diversification. On the
other hand systematic risk is one which cannot be eliminated and is
correlated with that of market portfolio.
A portfolio is efficient is there is no unsystematic risk. Therefore only effect
the security has on the portfolio risk is through its systematic risk.

Formulae: expected return = price of time + price of risk amount of risk

RS
where,
RS
IRF
RM

IRF+(RM IRF)

=
=
=
=

The expected return from a security asset.

The risk-free interest rate.
The expected return on market portfolio.
The beta factor, a measure of systematic risk of the
security/asset.

SYSTEMATIC RISK:
It is the part of total risk which cannot be eliminated by diversification. This risk
arises because every security has a built in tendency to move in line with the
fluctuations in the market. It is also known as non-diversifiable risk, or market
risk.
It is measured in terms of factor.

UNSYSTEMATIC RISK:
It is the part of the risk which can be eliminated by diversification. This risk
represents the fluctuations in returns due to the factors specific to the particular
firm only and not the market as a whole.

CAPM shows that the expected return for a particular security

depends upon three things :
1. The pure time value of money
2. The reward for bearing the systematic risk
3. The amount of systematic risk

SINGLE INDEX MODEL

Single index model overcomes the difficulties associated with MH model .

Underlying feature of single-index model is that all stocks are affected by movements in
stock market. Casual price of share price reveals that when the market moves up ,
prices of most of the shares goes up and vice versa. This suggests that one reason
why security returns might be co-related and ther is co-movement between securities is
because of a common response to market changes
The co-movement of stocks with a market index may be studied with the help of a
simple linear regression equation
Ri= I + I Rm + ei
Where
I is the component of securitys return that is independent of the market performance.
Ri is the rate of return on the market index
is the constant that measure the expected change in Ri given a change in Rm
ei is the error term representing the random or residual return

SHARPE INDEX MODEL

This is also called Reward to Variability Ratio . In this ratio the risk is
measured in terms of standard deviation. The ratio is

R P I RF
SharpeRatio
P
In the above ratio, p is the standard deviation of the portfolio and shows
total risk of the portfolio. The Sharpe Index measures the risk premium of
the portfolio relative to the total amount of risk in the portfolio. This index
measures the slope of the risk- return line. The Sharpe Index helps
summarizing the risk and the return of a portfolio in a single measure that
categorizes the performance on a risk-adjusted basis. The larger the index
value, the better the portfolio has performed.

PORTFOLIO BETA

factor is used to measure the systematic risk. The beta can be viewed
as an index of the degree of the responsiveness of the security returns
with the market return. The beta coefficient is the relative measure of
sensitivity of an assets returns to change in the return on the market
portfolio.
The beta coefficient is calculated by relating the returns of a security
with the returns for the market.

S
COV ( S , M ) S M CORSM

CORSM
2
2
M
M
M

where
COV (S,M)

M2
S
M
CORSM =
portfolio

Covariance between the return of security, S,

and the return on the market portfolio, M.

=
Variance of the return of market portfolio, M.
=
Standard deviation of the security, S.
=
Standard deviation of the market portfolio, M.
Correlation between the return of the security an the market

eta of a portfolio
Under the risk and return analysis of a portfolio it has been discussed that
the variance of a portfolio can be found with the help of standard deviation
of each of the security and the correlation coefficient of the portfolio.
However in case of CAPM , the risk is measured in terms of . The of a
portfolio is the weighted average of the of individual securities in the
portfolio. So ,

p wi i

The choice of the best portfolio is involves two separate decision

1. Determination of the efficient set of portfolios and ,
2. Selecting , out of this efficient set , the one which is the best for the investor.
EFFICIENT FRONTIER:
The boundary AGEH is called the efficient frontier .
Portfolios to the right of this of efficient frontier are not
efficient because for a given rate of return , there would be
greater risk..
Portfolio at lower level that this efficient frontier are also not
good enough because for a given level of risk , the rate of
return would be lower.
Therefore, all portfolios lying on the boundary AGEH i.e. the
efficient frontier are called efficient portfolio .
The efficient frontier is same for all investors because of the
assumption that all investors are risk averse and want
maximum return at lowest risk.
Diagram:

RETURN

RISK

RISK AND RETURN

Every investment is characterized by risk and return.
A person making an investment expects to get some return form the investment from the
future but as the future is uncertain so as the future expected return
There are two types of returns
Expected return
Realized return
Expected return is the uncertain future return that an investor expects to generate
from his investment.
Realized return is the certain return that the investor has actually obtain from his
investment at the end of the holding period
The investor makes the investment decision based on the expected return from the
investment

Risk
Definition
Risk is the potential for variability in returns
An investment whose returns are fairly stable is considered as low
risk investment whereas an investment whose returns fluctuates
significantly is considered to be high risk investment
Elements of risk
The essence of risk in an investment in the variation in its returns
This variation in returns is caused by a number of factors
Total risk = systematic + unsystematic

Factors which produce variation returns

Systematic risk the impact of economic, political, and social
changes is system wide and that portion of total variability in security
returns caused are called systematic risk

Interest rate risk it is a type of systematic risk that particularly affects

debt, debt securities like bonds, and debentures
Market risk it is a type of systematic risk that affects shares
Purchasing power risk- it is also a type of systematic risk it refers to the
variation in investor return caused by inflation.

Unsystematic risk- the return from securities may sometime vary

because of certain factors affecting only that company issuing that
securities
Types business risk
financial risk

FUNDAMENTAL ANALYSIS
Fundamental analysis is a logical and systematic approach to estimate the future
dividend and share prices.

Fundamental analysis involves three steps

Economic analysis
Industry analysis
Company analysis

Economic analysis

The performance of a company depends upon , the performance of the economy . If the
economy is booming the income rises and the demand for good increases. The industry
tends to be prosperous.
Variables in the economy which affects the performance of the company
Growth rate of national income
Inflation
Interest rate
Government revenue, expenditure and deficits
Exchange rates
Infrastructure
Monsoon
Economic and political stability

Industry analysis
An industry is generally described as a homogeneous group of companies
An industry is a group of firms producing reasonably similar products which serve
the same needs of a common set of buyers. Traditionally industry are classified
on the basis of products like cement industry , cotton industry.. Etc..
Industry characteristics
The key characteristics that should be consider by the analysts are
Demand supply gap
Competitive conditions in the industry
Permanence
Labor conditions
Attitude of government
Supply of raw material
Cost structure

Company analysis
It is the final stage of fundamental analysis
It deals with the estimation of risk and return of individual shares Information
regarding companies can be broadly classified into two groups
Internal it consists of data and events made public by companies
concerning there operations. It includes annual report, public and Pvt
statement etc..

External- these are generated independently outside the company. These

are prepared by investment services and the financial players

FINANCIAL ANALYSIS
The financial statements of a company can be used to evaluate the financial
performance of the company. Financial ratios are the most extensively used
for the purpose.
Different ratios measure different aspects of a companys performance or health.
Four group of ratios are used to analyze the performance of a company.
1. Liquidity ratios these measure the company ability to fulfill its storm term
obligations and reflects its short term liquidity.
a) current ratio
b) acid test ratio ( quick ratio )
2. leverage ratios these ratios are known as capital structure ratios. They
measure the companys ability to meet its long term debt obligation. They
throw light on the long term solvency of a company.
a) debt- equity ratio
b) total debt ratio
c) proprietary ratio
d) interest coverage ratio

Profitability ratio- the profitability of a company can be measured by these

ratios. These ratios are calculated by relating the profit either to sales or
to investment , or to the equity shares.
There are three types of profitability ratios
1. Profitability related to sales
a) growth profit ratio
b) operating profit ratio
c) net profit ratio
d) administrative expenses ratio
e) selling expenses ratio.

2. Profitability related to investment

a) return on assets
b) return on capital employed
c) return on equity

Profitability related to equity shares

a) Earning per share

b) earning yield
c) Dividend yield
d) Dividend payout
e) Price earning ratio
Earning power
a) Return on investment
Activity or efficiency ratio
a) Current assets turnover
b) Fixed assets turnover
c) total asset turnover
d) Inventory turnover

SHARE VALUATION
Te investment decision of the financial analyst to buy or sell share is
based on a comparison between the intrinsic value of the share and the
current market price
If
Market price < intrinsic value, such a share should be bought
Market price> intrinsic value , such a share should be sold
Market price of a share and its intrinsic value are thus two basic input
essential for investment decision
The intrinsic value is estimated through the process of share valuation

Share valuation model

The valuation model used to estimate the intrinsic value of share is the
present value model .
The intrinsic value of a share is the present value of all future amount to
be received in respect to ownership of that share, computed at an
appropriate discount rate
The major receipts that come from ownership of a share are
Annual dividend
Sales proceed of the share at the end of holding period
These are discounted to find there present value taking into consideration
the risk involved and other investment opportunity

Share valuation models

1. One year holding period here a investor intends to purchase a
share now , hold it for one year and sell it off at the end of one
year.
2. Multiple year holding period- an investor may hold a share for a
certain number of years and sell it off at the end of his holding
period.
3. Constant growth model