Systematic risk is market-wide risk that affects all businesses, such as economic recessions or inflation, and cannot be eliminated through diversification. An example is the 2008 financial crisis. Unsystematic risk is specific to a company or industry, like management changes or product recalls, and can be mitigated through diversification. For instance, if a company's stock price drops due to a CEO scandal, that's unsystematic risk .

The Capital Asset Pricing Model (CAPM) assesses the expected return of an investment by relating the risk of an asset to its expected return above the risk-free rate. It uses the formula: Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate), where Beta measures the asset’s sensitivity to market movements. This model helps in understanding how much extra return an investor should expect for taking additional risk compared to a risk-free asset .

The EIC analysis framework examines economic factors, industry trends, and company specifics to evaluate investment value. It starts with analyzing economic indicators (E), which influence industry performance (I), leading to the assessment of individual company fundamentals (C). This top-down approach helps in identifying investment opportunities by understanding macroeconomic impacts, competitive forces within industries, and a company’s competitive positioning and financial health .

Insider trading undermines market integrity by giving unfair advantage to insiders and eroding investor confidence. Legal provisions, such as those by SEBI, impose penalties and jail terms for misinformation and misuse of confidential information. Regulations require timely disclosure of insider trades and mandate ethics in handling privileged information to enhance transparency and fairness in securities trading .

The market price of bonds and market interest rates have an inverse relationship because when market interest rates rise, the present value of a bond's future cash flows, which are fixed, decreases, leading to a drop in its market price. Conversely, when market interest rates fall, the present value of the bond's cash flows increases, causing its market price to rise. This is due to the fixed nature of bond coupons which, when compared to new bonds issued at higher rates, become less attractive, lowering their price .

SEBI’s reforms, such as stringent disclosure norms for IPOs and enhanced surveillance in secondary markets, protect investors by ensuring more transparency and reducing malpractices. Measures like frequent disclosures, accountability on directors, and mandatory grading by credit rating agencies for issues enhance market integrity and protect investor interests. For instance, book building process reforms ensure fair pricing and allocation in IPOs .

Dow Theory predicts stock market trends by identifying primary, secondary, and minor market trends through the analysis of price movements and volume patterns. It uses tools like trendlines and confirmation between indices. However, its limitations include delayed signals due to reliance on trend confirmation, ignoring fundamental analysis, and potential non-representativeness of indices used .

Inflation erodes the real return on investments by reducing the purchasing power of future cash flows. For example, if an investment yields a 5% return but inflation is 3%, the real return is only 2%. Taxes further reduce returns; capital gains tax on profits means that the net return is less than the nominal return. For instance, if a 5% return is subjected to a 20% tax rate, the effective return reduces to 4% before considering inflation .

The Efficient Market Hypothesis (EMH) proposes three forms of market efficiency: weak form (prices reflect all past market information), semi-strong form (prices reflect all publicly available information), and strong form (prices reflect all information, public and private). Efficiency is measured using tests such as the random walk model, event studies for semi-strong form, and tests on portfolio performance for strong form efficiency .

Bond duration measures the weighted average time to receive the bond's cash flows and indicates interest rate sensitivity. Modified duration adapts duration to provide a more direct measure of the interest rate risk, expressing the percentage change in price for a 1% change in yield. While bond duration is used for general sensitivity analysis, modified duration is more practical for estimating price volatility in different interest rate scenarios .