Portfolio Size and Diversification Effect in Lithuanian Stock Exchange Market

Aleknevičienė, Vilija; Aleknevičiūtė, Eglė; Rinkeviciene, Rasa

doi:10.5755/j01.ee.23.4.2565

Cited by 10 publications

(14 citation statements)

References 13 publications

(24 reference statements)

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“…In a more recent study by Alekneviciene, Alekneviciute, and Rinkeviciene (2012), they provide additional support to the above findings from the Lithuanian stock market. Specifically, they carry out an analysis on the effect of diversification from portfolios formed from the relatively few stocks traded on the Lithuanian stock exchange, a small market which consists of only 40 stocks (at the time of their study).…”

Section: Engku Ngah S Engkuchik 77supporting

confidence: 70%

“…Alekneviciene et al, 2012;Elton and Gruber, 1977;Evans and Archer, 1968;Statman, 1987) suggest that investors need to invest in between 10 to 40 stocks to fully diversify their portfolios, a few other authors suggest that investors may need a much higher number of stocks to achieve the full benefits of diversification (e.g. Cleary and Copp, 1999;Newbould and Poon, 1993).Moreover, a survey of a number of finance and investment textbooks by Newbould and Poon (1993) indicates different recommendations in terms of the minimum number of stocks for a portfolio to be fully diversified, i.e.…”

Section: Engku Ngah S Engkuchik 77mentioning

confidence: 99%

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A Review of Securities Commission of Malaysia’s Revised Shariah Stock-Screening Criteria

Engkuchik¹

2016

JIBF

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This paper addresses the perceived more tolerant Shariah-screening criteria by the Securities Commission of Malaysia (SCM). Recently, in 2013, SCM introduced the "two-tier" screening process of the stocks traded on Bursa Malaysia. Despite this revision, the two-tier process is seen as being less stringent than the Shariahscreening process of e.g. Dow Jones and MSCI. Such perception may affect the credibility of the SCM in determining Shariah-compliant securities compared to international standards. Proponents of SCM screening criteria argue that since Shariah screening in Malaysia only includes Malaysian listed stocks, more rigid screening process may limit the list of investible stocks, and may further restrict the benefits of diversification, i.e. one may not be able to form efficient portfolios or achieve appropriate risk-return portfolios while complying with the Shariah principles. This paper argues that the justification for the less-stringent screening process adopted by the SCM does not seem to be corroborated by theoretical or portfolio diversification studies, and evidence from the socially-responsible investing and Shariah-compliant empirical findings.

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Section: Engku Ngah S Engkuchik 77supporting

confidence: 70%

Section: Engku Ngah S Engkuchik 77mentioning

confidence: 99%

A Review of Securities Commission of Malaysia’s Revised Shariah Stock-Screening Criteria

Engkuchik¹

2016

JIBF

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“…Unsystematic or diversifiable risk is the portion of risk in a portfolio that can be diversified away by holding a pool of individual assets. Alekneviciene et al, (2012) find that the increasing diversification of portfolio gradually eliminated non-systematic risk, leaving only the systematic or market-driven risk. However, too much diversification helped to reduce the risk but it would increase operating costs and decrease on return.…”

Section: Literature Reviewmentioning

confidence: 88%

“…This unpredictability makes holding stock a more risky investment. Diversification has been the best way to minimize portfolio volatility (Xu 2003;Alekneviciene et al, 2012). Positive diversification value exists for any assets that are imperfectly correlated, the lower the correlation between the assets, the higher the diversification value.…”

Section: Literature Reviewmentioning

confidence: 99%

The Effect of Portfolio Diversification for the Bursa Malaysia

Norsiman¹,

Yakob²,

McGowan³

2019

AFR

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This paper examines the effect of portfolio diversification for stocks listed on the Malaysian stock exchange. We determine the extent to which the unsystematic risk component can be reduced through diversification posited by Modern Portfolio Theory. Prices of randomly selected stocks were obtained from Yahoo! Finance for the five year period starting from January 2010 to March 2014. In order to analyze the robustness of the empirical results, three sets of portfolios were tested in this study and each set contained 55 stocks. The total sample of 165 stocks was chosen from different sectors that are listed under Bursa Malaysia. In addition, the three samples were tested for two type of differencing intervals, daily and weekly, to obtain more robust results. The empirical findings of the study show that increasing the number of stocks in the sample portfolio leads to decreasing standard deviation (unsystematic risk) the investment portfolio for Malaysia Stock Market stocks until each portfolio is well-diversified. The uniqueness in this study is that the empirical results show that, the level of data frequency significantly influences changes in stock portfolio size required to obtain optimal portfolio diversification. Using the daily differencing interval, 45 stocks are need to eliminate unsystematic risk and using the weekly differencing interval, only 35 stocks are required to obtain a well-diversified portfolio.

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“…Co-movement and volatility transmission between the oil price and stock markets in the Baltic states was investigated by Bein (2017). Alekneviciene et al (2012) went inside the Lithuanian stock market to investigate a portfolio of different weight stocks and compared a diversification effect of differently-weighted stocks portfolios. Kregzde and Murauskas (2015) revealed the relationship between the Lithuanian Credit Default Swaps and the bond market, by using Vector Error Correction model.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Wavelets analysis of the Baltic equity market: risk and co-movement with the European market

Kregždė

2018

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This paper's objective is to explore equity market risk and co-movements between the Baltic stock markets of Estonia, Latvia and Lithuania and the European stock markets both in time and frequency dimensions. We analyse equity markets returns risk across different time horizons (frequencies). At the same time, we focus on the changes of the market risk and comovements of the Baltic and the European markets returns in time. The aim of the paper is to find the frequencies and time when volatility and co-movements change. We use monthly data in the period of 2000-2017. The wavelet analysis was employed to segregate the risk and co-movements at different time and different frequencies. Compared to previous studies, a novelty of the paper is the investigation of the markets at each time horizon separately. Our findings are consistent with the findings of other researchers who indicated that the Baltic markets are more integrated with the developed European stock markets during crisis periods. We have found some impact of accession to the EU on co-movements between the Baltic equity markets and the European market. We have discovered that co-movements are greater in low frequencies. From the investment diversification point of view, the effect depends on the investment horizon. Our conclusion is that for the investor with a time horizon of over 1.5 years diversification with the Baltic markets is not very efficient.

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Portfolio Size and Diversification Effect in Lithuanian Stock Exchange Market

Cited by 10 publications

References 13 publications

A Review of Securities Commission of Malaysia’s Revised Shariah Stock-Screening Criteria

A Review of Securities Commission of Malaysia’s Revised Shariah Stock-Screening Criteria

The Effect of Portfolio Diversification for the Bursa Malaysia

Wavelets analysis of the Baltic equity market: risk and co-movement with the European market

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