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ID number:780814
Published: 15.06.2004.
Language: English
Level: College/University
Literature: 32 units
References: Not used

The dissertation “Portfolio of stocks listed at RSE for resident” is an actual research which deliberates recommendations for choice of Latvian origin securities into investment portfolio through Riga Stock Exchange over viewing general situation. The client of this work is “Ridzene Sports” LLC that is willing to start investing the capital into securities using Latvian investing environment. Every year Latvian economy achieves better results and such factors reflect secondary market of financial instruments. Every year new market players become emitents, indexes have a tendency to rise and portfolio funds of asset management companies outperform themselves compared to previous years of operations.
In general, investors see healthy developing situation at the domicile stock market and these favourable environment allows increasing profits and securing capital. In this Dissertation author analyzed the situation of Latvian securities market in global, evaluating the most common and in author’s opinion useful mathematical models. The dissertation consist of two parts- theoretical part which explains the specifics and general principles of Latvian securities market, and practical part which explains key characteristic values of portfolio examination and calculations followed by analysis of securities.
The practical part of this work stresses portfolio management techniques and necessary calculations explaining scientifically designed formulas in order to analyze and form any portfolio of securities. The Author for the first time produced Markowitz Diversification Model implementation for portfolio of Latvian stocks for 1/12/2003-1/03/2004.

During the performed work, author came up with effective strategy of investment in securities, with a proposed fundamental analysis stressing the economical factors. The Dissertation presents the mechanisms of trading, as well as author’s proposal on how investing should be performed taking into account modern investment approaches of world famous investors to the Secondary market of financial instruments in Latvia.

This work consists of 76 pages, 8 tables, and 4 schemes. The analyzed material consists of 2 legal laws “On Securities”, “Law on the Financial Instruments Market”, 14 books, 1 conspectus, 6 articles, and 11 websites. Dissertation is recommended for top managers of organizations and potential investors who are willing to invest their capital in Latvian financial market.
This Dissertation is requested by “Ridzene Sports” LLC. The company is willing to start investing the capital into paper assets using Latvian investing environment. The reason why Author is authorized to develop this dissertation is because he is interested in the topic of Latvian securities market and after his graduation plans to make his carrier in this domain. During the research the Author used various literature of Latvian and foreign specialists. The up-to-date literature and latest information on the topic allowed Author to come up with the approach of the Dissertation.

Methods, goal, tasks and basic principles. Portfolio construction methods are based on the following hypothesis – effective and rational securities portfolio construction allows the investor to avoid considerable losses.

The goal of the Bachelor’s Dissertation is to elaborate recommendations for choice of Latvian origin securities into investment portfolio on the basis of overwhelming general situation

The following tasks are to be fulfilled for the purpose:

to analyse literature on securities portfolio construction;
to evaluate mathematical models (2,3,5);
to choose effective strategy of investment in securities;
to perform fundamental analysis;
to make risk assessment.

Basic principles of securities portfolio construction are conventional and are based on synergic research results of different sciences:

the investment model and financial engineering;
independence and feasibility;
conformity to functioning of the Latvian securities market;
the optimum diversification;
projective portfolio construction for the Latvian securities market.

The dissertation is written in order to show the practical and theoretical part on investing.

Theoretical part of the dissertation allowed understanding the current situation in Latvian market of paper assets, describing the basic rules and principles of capital circulation, legislation, participants etc. following by fundamental analysis.

The used method is efficient because it is explained not only to show the situation from the theoretical point of view, but also to highlight the practical side by showing the potential financing opportunities for investors using latest information and techniques.

Practical part highlights calculations and methods of portfolio management advisable in the modern literature and approaches of successful investors. The latest information and basic understanding of both, theoretical and practical part allow starting investing operations for the client company.

Normally investors make investments in securities both according to the securities market situation, and the chosen investment strategy and tactics, as well as in keeping with their financial capacities. Two most popular investment types are as follows:

investing a specific amount of money in securities at one go (represented in the Bachelor’s Dissertation below);
making regular investments in securities.

The meaning of the securities portfolio. The securities portfolio and its construction means that an investor owns a total of different securities, the same being made in order to diversify the investment risk. To be successful in such commercial activities, one should understand these business activities as complicated creative work, which requires the entrepreneur’s analytical approach and non-standard thinking. Such properties allow one to calculate complex combinations, to make mathematical models and to find rational solutions integrating accumulated intellectual experience of securities markets. In their turn, theoretically found solutions constitute the entrepreneur’s strategy and tactics, making him similar to an actor working according to the pre-set script. The idea that securities portfolio construction is high-class creative work is not a generally recognised fact yet, because there are stereotypes and thinking inertia and bias against businessmen as mean, selfish and narrow-spirited people.
On the contrary, progress leading to general welfare is implemented owing to active and talented people. It is important to be aware that everybody has to earn money independently; hence each entrepreneur strives for the key goal of earning money. However, this aim is only achieved, provided the price and quality of services or the product offered thereby are better than with his competitors. The entrepreneur is a significant public and social person in the securities market and it is due to his personality and nature that he can fulfil his creative mission in the securities market, therefore each person constructing a security portfolio has his own authorship or brand.
Portfolio construction, diversification, management, mathematical models, up-to-date financial engineering products, assessment of economic and financial risks, return calculations and inducing investments become of great importance in business.
The main thing is to make investment so as to avoid considerable losses related to investments in securities of a specific issuer; hence investment diversification is required, i.e. dividing the investment in different securities so that possible losses from securities of one issuer would not have devastating impact on the total value of the entire investment.…

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