Diversification of Common Stock Investments Through Limited Diversification Portfolios (LDP)
| dc.contributor.author | Theng Theng, Koh | |
| dc.date.accessioned | 2018-06-01T07:19:32Z | |
| dc.date.available | 2018-06-01T07:19:32Z | |
| dc.date.issued | 2005-06 | |
| dc.description.abstract | Most investors are risk averse who intends to minimize overall risk. They will select the portfolio with the lower level of risk given that two portfolios are equal rates of return. Diversification is useful for a risk averse investors as to form their optimal portfolios. In this study, we analyze 12 securities listed at the Main Board of Bursa Malaysia of the following industries: Consumer Products, Industrial Products, Trading of Services, Technology, Finance and Plantations. The selected data were the high closing price of 12 stocks traded in Bursa Malaysia from 01 January 2000 to 31 December 2004. This study focused on investment in common stocks and construct a Limited Diversification Portfolio Model (LDP) by Jacob (1947). Using the formulae by Szego (1980), we calculate the optimal risk level and make comparison for the portfolios of different size. The statistical tests (F-test and t-test) applied here are intended to detect differences in risk level among portfolios, of varying sizes. A reference portfolio is selected to compare with other optimal portfolios if two portfolios under study show significant differences in its risk level with portfolio with different size. Also, once can analyze a portfolio robustness using the Minimax Criterion. The results shown that Portfolios I, II and III are different in their optimal risk levels in a statistically sense. However, the robustness criterion shown that Portfolio IIC provides a robust portfolio. Portfolio IIC is a best-of-the-worst-risk portfolio. This study concludes that, diversification in a limited portfolio investment show differences in risk level for portfolios of different size. Investor can apply statistical methods presented in this study to analyze and calculate risk level of portfolios of different size. It assist small investor to make decision in the creation of optimal portfolio and to achieve diversification even with limited resources. The robustness of portfolio is another criterion (qualitative aspect) a small investor can consider to make a best selection of optimal portfolio. | en_US |
| dc.identifier.uri | http://hdl.handle.net/123456789/5641 | |
| dc.subject | Stock Investment | en_US |
| dc.subject | Limited Diversification Portfolios (LDP) | en_US |
| dc.title | Diversification of Common Stock Investments Through Limited Diversification Portfolios (LDP) | en_US |
| dc.type | Thesis | en_US |
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