Risk, return and portfolio optimization for various industries in the ASEAN region

Behavior of Global Investors in Five ASEAN Stock Markets in the Industry Level

“…The use of EW and VW will be able to produce different levels of correlation between industries in the five ASEAN exchanges and will further determine the level of benefit of diversification among different industries. The use of EW and VW is also in line with the research conducted by Vo et al [12], which is based on the research of Nguyen [13].…”

“…The benefits of international diversification for industry level correlations are measured by Pearson correlation referring to the studies of Vo et al [12], Nguyen [13], Setyawan [14], Luzey and Zhang [18], and Dutt and Mihov [19]. They formulate the unconditional level industry correlations, namely:…”

“…Based on formula 1 and Kim's [11] and Vo et al [12] studies, the unconditional industry level correlations such as EW can be measured with this formula:…”

“…As suggested by Nguyen [13] and Vo et al [12], when applied at the country level, the formulation ρ (R ijt , R wt ) in part 1 has been modified, namely, the component R ijt to R j (state market index return j at time t). The importance of estimation ρ (R jt , R wt ) is to prove the hypothesis of differences in the level of integration at the country level.…”

“…Referring to Table 2, the practical implication is that global investors can choose the basic material industry (code 15) and industrial goods (code 20) because both have very low standard deviation values among other industries. The basis of this selection method refers to study from Hwang and Sitorus [4] and Do et al [5], Nguyen [13], and Vo et al [12]. Table 3 shows the results of the F-test to prove whether there are differences in the level of integration at the country level in ASEAN, which at the same time prove the presence or absence of differences in the benefits of international diversification between countries.…”