Selecting portfolios for composite indexes: application of Modern Portfolio Theory to competitiveness

Santos, Silvio Francisco dos; Brandi, H. S.

doi:10.1007/s10098-017-1441-y

Cited by 8 publications

(3 citation statements)

References 9 publications

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“…A balanced portfolio can be achieved through diversification (Brigham & Houston, 2019). Dos Santos and Brandi (2017) added that the model's objective is to develop an efficient frontier of the best portfolio setup. In this setup, the investors could maximize their expected return rate after considering the risk level or volatility level.…”

Section: Financial Theoriesmentioning

confidence: 99%

Predicting Long-Run and Short-Run Movement of Sectoral Index: Evidence From Philippine Stock Market

Sucuahi¹

2023

IJFR

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The financial markets provide a viable avenue for investors who wants to invest their idle resources. Investors need accurate information to minimize investment risk and make the right investment decision. This study attempted to test the predictability of the Philippine Stock Exchange (PSE) sectoral indices. The data used in this study are the daily closing price of the six sectoral indices from January 2010 to December 2019. Augmented Dickey-Fuller (ADF) for stationarity test and Johansen Cointegration and Granger Causality analysis were used to test the long-run and short-run relationship among the six sectoral indices. The results showed that all indices are not predictable at the index level (I(0)) but predictable at the first difference (I(1)). The study found no long-run relationships between sectoral indices. The result also revealed that the sectoral indices have a short-run relationship in both directions.

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Section: Financial Theoriesmentioning

confidence: 99%

Predicting Long-Run and Short-Run Movement of Sectoral Index: Evidence From Philippine Stock Market

Sucuahi¹

2023

IJFR

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“…In 1952, Markowitz introduced a mean-variance analysis that focused on reducing investment risk through diversification. This model is now known as the Modern Portfolio Theory (MPT) (Dos Santos & Brandi, 2017), and it explains how investors can structure their investment portfolios to minimize investment risk. The diversification of investments limits the risk (Brigham & Houston, 2019), as balancing a portfolio is a significant issue faced by several investors.…”

Section: Finance Theoriesmentioning

confidence: 99%

Modeling Long-Term Relationships in Philippine Stock Market (PSE) Indices: A Cointegration Analysis

Sucuahi

Bije

2020

Asian Economic and Financial Review

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Over previous decades, market participants have been unsure about how to forecast the movement of the stock market. Coming up with a good forecasting model could lead stock market participants towards a less risky investment portfolio. This study attempts to explore the haphazard nature of Philippine Stock indices and the long-term relationship between Philippine Stock Exchange (PSE) sectoral indices and the PSE index. The data series used are the daily closing values of the PSE index and six sectoral indices between July 2010 to December 2019. This study employs an Augmented Dickey-Fuller (ADF) unit root test and a Johansen cointegration test. The results revealed that all indices are non-stationary at index level, but stationary at first difference. The results showed that all indices followed a random walk; however, no long-term relationships between the PSE index and five sectoral indices were found. Therefore, long-term investors are able to diversify their portfolio to reduce investment risk. Contribution/ Originality: This study contributes to the existing literature on employing a cointegration analysis on the Philippine stock indices. It provides investors with additional perspectives on forecasting the stock market movement at a macro level. The results offer long-term investors vital information they can use when managing their portfolio.

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“…MPT provides the two important indicators expected returns and risk measured by standard deviation at a given weight. The use of MPT allows the construction of efficient frontier and optimization of a set of portfolios which provide the optimal weights of portfolio in terms of a given level of risk or volatility [2]. In finance, some investors may prefer low risk while others are more likely to accept a high-risk strategy.…”

Section: Introductionmentioning

confidence: 99%

Should we focus more on the offline retail when constructing financial portfolios?

Cai

Liu

2023

AEMPS

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Modern portfolio theory has been researched and applied widely. This paper shows an application of the modern portfolio theory to choose optimal weights for a composite stock s portfolio. It could help optimize investors portfolio by increasing returns and decreasing volatility. Considering returns and volatility at the same time, Sharpe ration is a good indicator. To research portfolio optimization, this article uses Monte Carlo methods to acquire the weights of securities in portfolio that has the highest Sharpe ratio. Current studies about portfolio theory do not take safe securities into consideration. Therefore, this paper first concludes risk-free asset with other risky assets in portfolio. The portfolio in this study includes five stocks (Walmart, Amazon, Dexcom, Warner Bros., T. Rowe) in different sectors and risk-free asset (one-year U.S. Treasury Securities). The result shows that the weight of offline retail increases as the proportion of risk-free asset rises. This has implication that risk-averse investor might prefer offline retail stocks compared with other stocks in portfolio.

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Selecting portfolios for composite indexes: application of Modern Portfolio Theory to competitiveness

Cited by 8 publications

References 9 publications

Predicting Long-Run and Short-Run Movement of Sectoral Index: Evidence From Philippine Stock Market

Predicting Long-Run and Short-Run Movement of Sectoral Index: Evidence From Philippine Stock Market

Modeling Long-Term Relationships in Philippine Stock Market (PSE) Indices: A Cointegration Analysis

Should we focus more on the offline retail when constructing financial portfolios?

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