Establishing optimal allocation for different stocks in a portfolio via modern portfolio theory is highly depended on the accuracy of the return and risk estimation. For retail investors, technological advancement has made it possible for them to apply the complex estimation procedure for decision making. Therefore, this study aims to assess the mean-variance Shariah-compliant portfolio performance with model-based return and risk estimation. The methodology adopted is based on the implementation of ARMA and GARCH model, focused on the daily stock prices from year 2011 until 2018. Further, we used one-step ahead forecast for the best ARMA-GARCH model as well as an arithmetic mean and variance estimation to prepare the composition of diversified portfolio weights for top 10 constituent companies listed in FBM Hijrah Shariah (FBMHS) Index. We also measure out of sample performance in a constructed portfolio using Sharpe, Treynor and Jensen’s measures. The result shows that the stock allocation for the model-based portfolio is less diversified as compared to non-model-based portfolio. The composition of the model-based portfolio weight is capable of achieving high annual returns which can compensate for high risk. The out of sample portfolio performance of both techniques is capable to outperform the FBMHS Index.
Most economic and financial time series are trended and not stationary and therefore the raw data need to be detrended by differencing. An appropriate and efficient model is a good practice for evaluating the stock price performance. This paper utilized the Box-Jenkins methodology for modeling the stock price for the healthcare sector in the Malaysian stock market. This study focused on one shariah compliant company, namely Hartalega Holdings Berhad, which is one of the major healthcare companies that manufactured clinical Nitrile gloves in Malaysia. The data of monthly stock price is collected from April 2008 until December 2020. The findings of this study showed that ARIMA(2,1,0) is the best model to represent the time series data according to the smallest values of AIC and SC as well as the satisfaction of Ljung-Box test statistics. Through this study, investors able to monitor the investment portfolio from estimating the stock price performance of healthcare sector, while considering the current healthcare economic situation in Malaysia.
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