Investment and Portfolio Management
... Broadly, behavioural factors influencing financial decisions have been grouped in to Prospectbased factors and heuristic-driven factors (Kannadhasan, 2015;Waweru, Mwangi and Parkinson., 2014). Chandra (2008) submits that prospect theory basically which describes how people frame and value a decision under the condition of uncertainty. Four key elements of the theory pinpointed by Babarinde and Bello (2019) are mental accounting, loss aversion, regret aversion and selfcontrol. ...
... This refers to the human tendency to form judgment, opinion, or conclusion based on stereotypes, limited information like being excessively optimistic about past winners but overly pessimistic about past losers (Chandra, 2008;Elton, Gruber, Brown and Goetzman, 2007;Sherif, 2016). It can also be described as the human tendency to estimate the likelihood of an event by comparing it to a previous incident that already exists in their minds. ...
... It makes individuals assess their options by comparing its similarity with an existing prototype (Prosad, et al., 2015).In this heuristics, judgments are made on the basis of how well circumstances represent or match particular stereotypes that have emerged from past experience (McMahon, 2005;Sherif, 2016). Representativeness manifests when investors equate good companies with good stocks, and overly optimistic about past winners and overly pessimistic about past losers (Chandra, 2008;Sherif, 2016). Therefore, representativeness is the phenomenon that make people look for a pattern in a series of random events. ...
Contrary to the traditional finance theory founded on the notion of perfect rationality of human actions, behavioural finance operates on the principle of bounded rationality, where in addition to reason, emotions, biases, heuristics and other human behavioural traits and tendencies influence human financial decision making process. These behavioural traits which tend to influence the financial decisions generally, but particularly, the investment decisions of economic agents are numerous. However, they are classified under two main headings: prospect theory and heuristic decision theory. This paper reviewed some behavioural factors influencing investment decisions from perspective of heuristic decision theory. From the review, it was discovered that although heuristics like representativeness, overconfidence, availability, anchoring and adjustment etc., have impact on investment decision but strategies for their identification, recognition and management need to be given proper attention in the financial community, most especially in Nigeria. Thus, the paper suggested that models of decision making should be hybrids of traditional theory of rationality and the tenets of behavioural finance, for this if employed in investment decision, will facilitate the attainment of optimality. Furthermore, more studies in Nigeria should be devoted to the study as well as the management of these heuristics, biases and other aspects of human behavior that have bearing on activities in the investment world.
... It often changes as a result of inflation, productivity of capital and Federal Reserve policies and also affects both the future cash flow of firms and discount rate. According to Chandra (2004),a rise in interest rate decreases corporate profitability and likewise leads to an increase in the discount rate applied to equity investors; both of which affects the stock prices adversely. Consequently, a rise in interest rate is expected to impact negatively on the performance of the organization and thus on stock market prices.Ogbulu (2010) finds a negative long-run relationship between interest rates and stock returns in Nigeria and also a uni-directional causality running from interest rates to stock returns. ...
... During period of high economic growth, there is increase in the demand for goods and services (stocks inclusive) because of the potential for higher profits while period of depression is associated with lower expected returns on investment assets and capital because investors' confidence on the prospect of the economy may be dampened. Chandra (2004)find evidence for positive relation between GDP growth rate and stock market returns. ...
This study investigates the impact of macroeconomic variables on stock price movements in Nigeria using VAR model and granger causality tests to analyse the long run and short run dynamics of stock price movement and the macroeconomic variables with time series data spanning from 1981-2014. The Impulse response and Variance decomposition used to explain the dynamic properties of the VAR model suggest that the response of ASI to one standard deviation in INF, INT, and RGDP were all fluctuating whereas its response to one standard deviation of EXR and IPI were relatively stable overtime. The study recommends that the monetary authorities and policy makers should pay attention to changes in monetary aggregates in view of their sensitivity to stock price movements in Nigeria.
... If an institution's ROA were fairly constant, this ratio could be used to forecast earnings in future periods. Unlike ROE, this ratio measured profitability regardless of the institution's underlying funding structure; but did not discriminate against MFBs that were funded primarily through equity (Chandra, 2005). ...
... It must also be noted that, ROE indicated its ability to build equity through retained earnings and increased equity, which enabled the MFBs to leverage more financing to grow its portfolio. By excluding donations and non-operating revenues, this ratio demonstrated an institution's ability to generate income from its core financial service activity (Chandra, 2005;Crabb and Keller, 2006). ...
After several reforms in Nigerian banking sub-sector, the regulatory and supervisory framework policy of Central Bank of Nigeria (CBN) has not adequately improved performance of Microfinance banks (MFBs). In view of this, this paper assessed the impact of government regulations on MFBs performance between 2007- 2016. The paper used secondary source of data by assessing the financial statements of MFBs. A pooled Ordinary Least Square (OLS) technique was used for the analysis of data. The result showed that coefficient values of capitalization (4.64) and reserve (7.21) were positive and consistently associated with higher MFBs performance, while investment in Treasury bill (-4.30) was negative but statistically significant in driving MFBs performance at (P<0.01). The study concluded that regulatory frameworks via strong capitalization and reserves influenced and improved MFBs financial performance.
... Conversely, the strong form efficient market theory holds that security values reflect all available information from both public and private sources. Consequently, if the stock market is strong form efficient, it will not be possible to earn abnormal return even if an investor is privy to news that is not available in the public domain [5,6,7]. ...
... The test for semi strong efficient market requires a measure of abnormal earning due to new information. Thus, it requires the deduction of actual returns from expected returns over the event window to get the abnormal return [32,5,26]. This led us to test the semi strong market efficiency by examining the Average Abnormal Return and the Cumulative Average Abnormal Return to evaluate the performance of the Nigeria stock market after news about monetary policy rate is publicized. ...
A capital market is said to be efficient if new information are quickly reflected in stock prices. This study empirically examines how the prices of stocks listed on the Nigerian Stock Exchange quickly respond to monetary policy announcement. The daily All Shares Index and 41 monetary policy announcement from 2014 -2020 were used as proxy for stock prices and new information respectively. The Researcher adopted the event study methodology and a 21 day event window was constructed. That is 10 days before monetary policy announcement (-10) and 10 days after the announcement (+10) in addition to the event day. The average abnormal returns (AAR) and the cumulative average abnormal returns (CAARs) were computed and analyzed using the t-statistic to ascertain whether it is possible to earn abnormal return due to monetary policy announcement. The findings revealed that it was not possible to earn abnormal return due to monetary policy announcement. The implication of this result is that stock prices quickly adjust to new information (monetary policy rate announcement) therefore making it difficult for market participants to outperform the market.Thus, the Researcher concluded that the Nigeria stock market is semi-strong form efficient.
... Likewise, a highly skilled surgeon who migrates to Nigeria from a developed economy may become poorer because of poor wages. The theory of Finance explains how systematic risk which comprising economic risk, social risk and political risk affects the value of assets generally, is not manageable by portfolio diversification, while unsystematic risk can bo diversified away to improve returns (Chandra, 2008;Reilly and Brown, 2006). In the same vein, systematic poverty is proposed by us to be only manageable by public sponsored programmes while unsystematic poverty which is induced by vulnerability to occurrence of social risks could be handled by private insurance and SRM. ...
Social risks are at the roots of insecurity, poverty and underdevelopment if unmanaged. Electricity output and other social policy risks combine to increase vulnerability to poverty. This paper studies the relationship between the existences of social risk management and increase in unsystematic poverty, which seems to explain the prevalence of systematic poverty in Nigeria using structural model equations. It is found that the vulnerability of the poor increases with lack of social risks management. We recommend that social risk management policy targets should be to adopt the 'Nordic model' for energy development, wages and pension payments should be inflation indexed.
... One of the methods that measured bank performance was through return on asset (ROA). Return on Asset (ROA) helped to measure the company's capability to make profits relative to its assets (Chandra, 2005). A higher ROA was an indication of an increase in the company's earnings realized through the efficient use of company's total assets over a particular period. ...
This study assessed Information Communication Technology (ICT) and bank performance before and during COVID-19: Empirical evidence of Nigeria. The urgent need for ICT in banking subsector was unavoidable in Nigeria to meet daily liquidity needs and ease business transactions. Panel data comprised pooled Least Square (PLS), Fixed Effects Model (FEM) and Random Effects Model (RAM), which were adopted for a period of ten (10) years (2011-2020). The choice of adopting the appropriate model could be traced to Hauman test outcome. The secondary source of data was from financial statements of thirteen (13) purposively sampled banks. Findings showed a mixed marginal influence of ICT on bank performance in Nigeria and were statistically significant. The study concluded that banks' financial products / services were fully supported and driven more by information communication-technology before and during recent temporary lockdown in Nigeria. The paper recommended that regulators and policymakers should review and implement information-technology vis-à-vis Fin-Tech policies as incomparable mechanism to improve bank performance in case of any uncertainties in the nearest future.
... The greater the volatility of the price of an asset, the more volatile the price of the asset. According to Tandelilin [25], volatility (variation of returns) is representative of risk in Markowitz analysis and expected return is representative of reward. Stock price volatility based on past stock price movements (historical data) over a certain period of time. ...
Liquidity is one of the important things in investing in the stock market. The Indonesia Stock Exchange as a regulator makes and establishes regulations in the capital market to conduct trading in an orderly, fair and efficient manner. One of the amended provisions in the regulation is regarding the free float or the percentage of the number of shares outstanding in the public with the aim of increasing the liquidity of the listed shares. In addition to free float, the risk in investing also needs to be considered. Behind a high return there is a high risk as well. High risk in the volatility of stock returns. High volatility attracts investors to invest in the stock market. Investors with risk-taking tendencies prefer this high-volatility condition because it allows them to earn higher returns, thereby increasing liquidity through the trading volume of these shares. This study involves a number of control variables that together determine market liquidity, namely Stock Return, Firm Size and Stock Price. The analysis was carried out on property and construction sector companies listed in the 2016-2020 period. The analytical method used is multiple linear regression analysis using the E-Views 10 application. The results of the analysis found that free float and volatility have a positive effect on stock liquidity, either by including or including control variables. These results indicate that information about free float and volatility is a consideration in capital market investment decisions.
... Consequently, people make decisions based on the potential value of gains and losses rather than on the utility of the decision. As described by Chandra (2008), prospect theory as an alternative model for expected utility theory describes how people frame and value a decision involving uncertainty. Therefore, the key elements of the theory are mental accounting, loss aversion, regret aversion and self-control. ...
Human beings are made up of emotions in addition to reason but emotions sometimes tend to dictate their investment decision. The behavioural traits which tend to influence the financial decision generally and investment decision of economic agents are numerous. Using content analysis method, this paper reviews some of the behavioural factors influencing investment decisions with emphasis on prospect theory. This is aimed at provoking further empirical research on the subject and to further create the awareness on the need for incorporation of these factors in investment decisions and as well as in financial modelling. From the review, it was discovered that although behavioural factors: mental accounting, regret avoidance, loss aversion and self-control, have impact on investment decision but there is a need for investors to further give adequate recognition and consideration to these factors, manage these biases and strategize to avoid any kind of bias, in their investment decision making so as to minimize losses.
... , Chaudhuri and Smiles (2004), and Buyuksalvarci (2010) found a significant relation between stock market and real GDP and also Wickremasinghe (2011), Ifuero Osad and Evbayiro-Osagie (2012), Lokeswar Reddy 2012, Nijam et al. (2015 were concluded GDP has a significant and positive relationship with stock market performance. The higher growth rate of GDP is more favorable to stock market (Chandra 2004) this is express as GDP have a positive relationship with stock market performance. Based on these discussions the Hypothesis is H1a: There is a significant and positive relationship between GDP and ASPI Inflation INF means that increasing the prices of goods and services over time (Kimani & Mutuku, 2013). ...
... A portfolio is a term for a combination of some securities. Portfolios mainly deal with the problem of how to allocate one's capital to a large number of securities so that investments can bring about the most profitable returns (Chandra, 2017). Portfolio analysis is a quantitative method for selecting the optimized portfolio to maximize returns and minimize risk in various uncertain environments. ...
Monte Carlo-Expected Tail Loss (MC-ETL) is the new expansion method that combines simulation and calculation to measure investment risk. This study models US stock prices using ARIMA-GARCH and forms an optimized portfolio based on Multi-Objective that aims to analyze the portfolio investment return. The next portfolio return will be simulated using the Monte Carlo (MC) method, measured based on the Expected Tail Loss (ETL) calculation. The optimized portfolio comprises 5 US stocks from 10 years of data, with the biggest capitalization market on February 25, 2021. MSFT has the most considerable weight in the optimized portfolio, followed by GOOG, AAPL, and AMZN, whereas TSLA shares have negligible weight. Based on the simulation result, the optimized portfolio has the smallest ETL value compared to its constituent stocks, which is ±0.029 or about 2.9%. This value means that the optimized portfolio is concluded as an investment choice for investors with a low level of risk.
... For example, various forms of securities such as stocks, bonds or mutual funds. For smarter and riskier investors, their investment activities can also include investing in other riskier, more complex financial assets, such as warrants, options,and futures and international equities (Tandelilin, 2007). ...
The Covid-19 virus pandemic has had a major impact on Indonesia, including on the economy, exchange rates and stock prices. On March 2, 2020, the first Covid-19 case was announced in Indonesia by President Ir. Joko Widodo. This study aims to analyze stock prices of Transportation Sector Companies Listed on the Indonesia Stock Exchange before and after Covid-19. In this study, the data used is the average share price of 41 transportation companies listed on the Indonesia Stock Exchange 31 days before and 31 days after the announcement of the first case of Covid-19 in Indonesia. The data was processed using the Wilcoxon Test, through the use of SPSS version 25. The results of data processing showed that there was a significant difference in stock prices before and before the announcement of the first Covid-19 case. This is indicated by a significance value of 0.000 < 0.05. Where the price is lower than before the first case of Covid-19 was announce.
... As the largest Muslim country globally, Islam teaching underlies Indonesian activities to fulfill their necessities of life and prepare for a better future, an investment. According to Chabachib et al. (2019), Pamungkas et al. (2018) and Tandelilin (2017), an investment is a commitment of some funds or other resources used for certain businesses at present, with the intention to obtain profits in the future. Profits gained from an investment can be cash receipts (dividends) or an increased investment value (capital gains) (Lusyana and Sherif 2017). ...
This study aimed to predict the JKII (Jakarta Islamic Index) price as a price index of sharia stocks and predict the loss risk. This study uses geometric Brownian motion (GBM) and Value at Risk (VaR; with the Monte Carlo Simulation approach) on the daily closing price of JKII from 1 August 2020–13 August 2021 to predict the price and loss risk of JKII at 16 August 2021–23 August 2021. The findings of this study were very accurate for predicting the JKII price with a MAPE value of 2.03%. Then, using VaR with a Monte Carlo Simulation approach, the loss risk prediction for 16 August 2021 (one-day trading period after 13 August 2021) at the 90%, 95%, and 99% confidence levels was 2.40%, 3.07%, and 4.27%, respectively. Most Indonesian Muslims have financial assets in the form of Islamic investments as they offer higher returns within a relatively short time. The movement of all Islamic stock prices traded on the Indonesian stock market can be seen through the Islamic stock price index, namely the JKII (Jakarta Islamic Index). Therefore, the focus of this study was predicting the price and loss risk of JKII as an index of Islamic stock prices in Indonesia. This study extends the previous literature to determine the prediction of JKII price and the loss risk through GBM and VaR using a Monte Carlo simulation approach.
... Investment is a form of sacrifice by individuals or institutions in the hope that it will provide greater returns in the future. Chandra (2017) describes the investment as a sacrifice either in the form of money or other resources in the present for future benefits. Investment decisions arise because of the investment options or opportunities available. ...
Small and medium-sized enterprises (SMEs) are increasingly considering international expansion as one of the sustainable growth strategic options. This study aims to reveal how the effect of internationalization as a moderator of SMEs size, age, and other financial determinants toward investment opportunity set of SMEs that listed on the Indonesia Stock Exchange (IDX) from 2006 to 2020. Market to book asset ratio used as a proxy of investment opportunity set of SMEs. This study is one of the most important in the context of Indonesian SMEs as there were limited previous studies that have explored the internationalization factor. A total of 102 SMEs companies with 156 data observations were studied. A moderation regression analysis was used to test whether the determinants of the investment opportunity set were statistically significant. Surprisingly, the study found that the degree of internationalization has a moderating effect that weakens the relationship between SMEs age and size on investment opportunities set (market value ratio).
... Research has shown that if time is of the essence, heuristics are quite useful (Waweru et al., 2008), nonetheless, sometimes they lead to biases (Tversky & Kahneman, 1974). Other researchers add to this view by classifying the heuristics as being ignorant to sample size, neglecting base rate, conjunction fallacy and innumeracy (Barberis & Thaler, 2003;Chandra, 2017;De Bondt & Thaler, 1995). ...
Numerous studies had been conducted to contribute to the literature on the marketing and finance fields. However, there is a huge deficit of literature on this interdisciplinary area. This research tries to reduce this gap by undertaking an investigation into investor's behavior and brand equity in the finance and marketing interface along with few studies. The research specifically seeks to unravel the effects of brand equity dimension on portfolio management. The study is conducted via an online survey among educated adults who currently hold, have once held, and or intend to hold an investment instrument of any kind in Istanbul, Turkey. The Structural Equation Modeling (SEM) technique was used to test the structural relationship between the measured variable (portfolio management) and dominant variable (brand awareness). The results show that brand equity dimensions of financial assets are vital construct that significantly impact investors' behavior and shapes the construction of portfolio of financial assets. ÖZET Pazarlama ve finans alanlarındaki literatüre katkıda bulunmak için çok sayıda çalışma yapılmıştır. Bununla birlikte, bu disiplinlerarası alanda büyük bir literatür açığı vardır. Bu araştırma, finans ve pazarlama arayüzünde yatırımcının davranışı ve marka değeri hakkında bir araştırma yaparak bu boşluğu, diğer az sayıda çalışma ile birlikte azaltmaya çalışmaktadır. Araştırma özellikle marka değeri boyutunun portföy yönetimi üzerindeki etkilerini incelemektedir.. Çalışma, Türkiye'de İstanbul'da bulunan, geçmişte ve/veya şimdi herhangi bir yatırım aracı değerlendiren/değerlendirmeyi planlayan eğitimli yetişkinler arasında çevrimiçi bir anket yoluyla yürütülmüştür. Temel değişkenler, portföy yönetimi ile baskın değişken-marka bilinirliği arasındaki yapısal ilişkiyi test etmek için Yapısal Eşitlik Modeli (YEM) kullanılmıştır. Sonuçlar, finansal varlıkların marka değeri boyutlarının yatırımcıların davranışını önemli ölçüde etkileyen ve ideal varlık portföyünün yapısını şekillendiren hayati bir yapı olduğunu göstermektedir.
... Assets are allocated to emerging industries in the hope of obtaining profits sufficient to pay for the cost of financial services. The pursuit of stable profits is an important topic related to asset allocation (Sharpe 1992;Xing, Cambria, and Welsch 2018) and portfolio management (Reilly and Brown 2011;Chandra 2017). Asset diversification through portfolio management is an important issue in seeking to control risk over the long term. ...
When it comes to asset allocation and portfolio management, Kelly criterion is a mathematical formula used to optimise expected log-returns over the long term. Nonetheless, not all stocks are well suited for analysis using Kelly criterion, due to their transient nature and noisy data. This paper presents an innovative index by which to assess the suitability of stocks for analysis using the Kelly criterion. When applied to real-world stock data, the correlation coefficient between the proposed KSI and log-returns based on the Kelly criterion was −57.045% with a p-value of 1.215×10−1. In a robustness test based on the Mid-Cap 100 dataset, the correlation coefficient was −44.064% with a p-value of 2.438×10−5. The results demonstrate the efficacy of the KSI for portfolio management.
... Stock market sentiments can be represented by market indices, and these indices are based on samples that are fairly reliable because of the tendency of all stocks to move together. When the purpose of an index is to represent the changes in the value of stocks, one can have tremendous confidence in a small sample of large companies because relatively few companies account for a large proportion of the value of all companies (Chandra, 2013). ...
... Market capitalization wise NSE is the world's 9th largest stock exchange and daily turnover basis for derivatives and securities; it is the largest exchange in India. According to sources, it has around US$1.59 trillion market capitalization and over 1 ...
The investor always prefers to have less risk and higher returns and to mitigate the risk and investors will do diversification. Diversification means combine of two or more assets, which gives the least risk and highest return. Combine of two or more assets is called portfolio. Risk and return are two fundamental and important factors for the construction of a portfolio. Every investor's motto in the construction of a portfolio is to minimize the risk and to maximize the return. An optimal portfolio is called which has the least risk highest return. Sharpe's Index Model (SIM) is the best and perfect model for the construction of an optimal portfolio. This study tries an attempt to build an optimal portfolio using Sharpe's Index Model (SIM) by using NSE NIFTY Shares.
Key Words: Diversification, NSE NIFTY, Optimal portfolio, Sharpe's Index Model, Risk and Return
... An optimal portfolio is an investor-selected portfolio of many selections available in an efficient portfolio set (Tandelilin, E. 2010). The investor's chosen portfolio is a portfolio that matches the preference of the investor's return and the risk he is willing to bear. ...
A portfolio deals with how one allocates several shares in different types of investments to achieve an optimal profit. By diversifying, investors might reduce the risk level and optimize the expected rate of return at the same time. Based on that, this study raises a problem of how to design an optimal portfolio simulation, namely a combination of liquid JII shares listed on the Indonesia Stock Exchange in the period
... It describes the relationship between investment returns and the market return index. Beta determines the sensitivity of a particular investment to changes in market return index (Chandra, 2008). It provides information on the sensitivity of each asset to the happenings in the market in a linear relationship format Ri = α + βiŘM + ei, where Ri -represents the return of the investment; α -represents risk-free rate/constant for all asset (or intercept); βi -represents the beta coefficient/slope; ŘM -represents the market return index; ei -represents the error term. ...
The level of sensitivity of every investment option to a market index is crucial to investors. Sensitivity analysis of individual or a set of returns on investments to market return index predicts the reaction of the investment(s) to changes in the market index; informs investors of prospective performance of different investments types; as well as assists the investors in making appropriate decisions on investment selections. This paper assessed how sensitive indirect real estate investments in Nigeria were to market index. The three companies whose asset returns were considered in this study were real estate investment trusts listed in the Nigerian Stock Exchange. The data used in this study were sourced from annual reports of the listed companies, and reports of the Nigerian Stock Exchange. The beta coefficients were used to determine the sensitivity of the selected stocks to market return index. The study found a very low and insignificant beta coefficient among various real estate investments and market return index. Hence, there is no relationship between the market return index and the returns on the Real Estate Investment Trusts listed in the Nigerian Stock Exchange.
... An optimal portfolio is an investor-selected portfolio of many selections available in an efficient portfolio set (Tandelilin, E. 2010). The investor's chosen portfolio is a portfolio that matches the preference of the investor's return and the risk he is willing to bear. ...
... Banyak peneliti telah mengidentifikasi bahwa ada pengaruh di luar bisnis umum dan kondisi pasar, seperti faktor orientasi industri yang menyebabkan sekuritas bergerak bersama (Chandra 2009). Namun, bukti empiris menunjukkan bahwa model yang lebih rumit belum dalam posisi untuk mengungguli SIM dalam hal kemampuannya untuk memprediksi kovarians ex-ante antara imbal hasil sekuritas (Reilly & Brown 2006). ...
Abstrak--Konstruksi portofolio optimal menjadi fokus perhatian dan semakin menantang bagi manajemen investasi karena pada umumnya investor bermotif untuk memaksimalkan economic value-nya dengan memainkan peran dua variabel utamanya, imbal hasil (return) dan risiko (risk). Single Index Model(SIM) William Sharpe (1963) merupakan model yang sederhana terutama jika dibandingkan dengan model Markowitz (1952), terutama karena pertimbangan jumlah variabel masukannya. Model Markowitz dikatakan memiliki keterbatasan praktis serius; model Sharpe menyederhanakannya (http://www.economicsdiscussion.net/portfolio-management/theories-portfolio-management/sharpe-theory-of-portfolio-management-financial-economics/29763 [r. 07/05/20]).Penelitian ini bermaksud menggambarkan portofolio optimal seperti apa yang dapat dibentuk dari saham-saham LQ45 tahun 2019 menggunakan SIM tersebut. Hasilnya memperlihatkan 27 saham LQ45 terpilih dari 45 saham yang pantas menjadi anggota portofolio optimal dalam pembobotan mulai dari bobot yang tertinggi ke bobot terendah. Dengan tetap menyadari sepenuhnya bahwa SIM hanya menggunakan indeks (pasar) sebagai satu-satunya faktor pembentuk risiko berinvestasi,penerapan model ini memberikan pembelajaran yang amat berharga justru karena kesederhanannya sehingga mampu memberikan gambaran yang jelas dan dengan demikian tetap perlu dipelajari sebagai pengetahuan dasar dalam Mengelola Portofolio/ Investasi. Kata kunci: Sharpe’s Single Index Model, Portfolio Analysis, Optimal Portfolio Con-struction, Risk Characteristic Line. Abstract--Optimal portfolio construction is the focus of attention and is increasingly challenging for investment management because in general investors are motivated to maximize their economic value by playing the role of two main variable, return and risk. William Sharpe’s (1963) Single Index Model (SIM) is a simple model especially when compared to the Markowitz model (1952), mainly because of the consideration of the number of input variables. The Markowitz model is said to have serious practical limitations; the Sharpe model simplifies it (http://www.economicsdiscussion.net/portfolio-management/ theories-portfolio-management/sharpe-theory-of-portfolio-management-financial-econo-mics/29763 [r. 07/05/20]). This study intends to describe what optimal portfolio can be formed from LQ45 shares in 2019 using the SIM. The results show 27 selected LQ45 shares from 45 shares that deserve to be members of the optimal portfolio in weighting starting form the highest weight to the lowest weight. By being fully aware that SIM uses only the index (market) as the sole factor for investment risk, the application of this model provides valuable learning precisely because of its simplicity so as to provides a clear picture and thus need to be learned as basic knowledge in Managing Portfolio/ Investments. Keywords: Sharpe’s Single Index Model, Portfolio Analysis, Optimal Portfolio Con-struction, Risk Characteristic Line.
... Stock market sentiments can be represented by market indices, and these indices are based on samples that are fairly reliable because of the tendency of all stocks to move together. When the purpose of an index is to represent the changes in the value of stocks, one can have tremendous confidence in a small sample of large companies because relatively few companies account for a large proportion of the value of all companies (Chandra, 2013). ...
Spillover effects from Equity markets to Commodity markets and vice-versa are of interest to researchers for a while now. The purpose of the present study is to investigate the volatility spillover from the Indian Equity markets to Commodity Futures markets. The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) turned into proxies of equity markets while Cardamom, Cotton, Menthaoil, and CPO are proxies of the commodity market. Each proxy of the equity markets and commodity markets were converted into a log-scale return. Granger causality is employed to identify the direction of information flow. Results reveal that there is no bi-directional causality from Equity markets to Commodity markets. At the same time, returns on cardamom are affected by returns on BSE, and Returns on Cotton affects Equity markets. Further, Dynamic Conditional Correlation Generalised Autoregressive Conditional Heteroscedasticity (DCC-GARCH) is applied to investigate the volatility spillover from equity markets to commodity markets. There is no volatility spillover or transmission in the short-run, but there is a possibility of spillover from the BSE and NSE to the constituent commodities. The study has implications for both academia and market participants such as portfolio managers, the stock exchanges and the market regulator
Keywords: Volatility Spillover, Equity markets, Commodity markets, Granger Causality, Dynamic Conditional correlation
... The data is analysed using two different approaches. To analyse investment return, the ROI is employed which is most common measure evident by extant literature (Chandra, 2017). The return on investment is calculated for each team and PCB separately for each season. ...
Purpose
The study invites seminal investigation on potential of investment returns in professional sports leagues. In line with scope of research, the analysis of this study brings into focus the Pakistan Cricket Board (PCB) and franchises pertinent to Pakistan Super League (PSL) for investment appraisal and returns analysis.
Design/methodology/approach
The methodical aspect of research deals with financial ratios and sensitivity analysis capturing the potential of returns on investment for target sample of study.
Findings
The investment appraisal substantiates the significance of potential returns on sports projects. The returns of investment reports sluggish seasonal returns during initial phase of PSL; however, return on investment (ROI) optimized with the maturity and further capitalization of Pakistan Supper League in more concentrated competitive environment. Sensitivity analysis proves variability of returns with changes in growth prospect of franchises.
Research limitations/implications
The study provides important working knowledge for existing and potential new investors and sports boards to consider the financial investment feasibility through customized investment models and relative orientations of promotion of sports, new talent hunting and re-fabricating the structure of sports in line with new age.
Originality/value
The efficacy of research is ensured through empirical verification of data obtained from reliable sources, and the novelty of research comes from investment appraisal and analysis of growing sports league familiarized as Pakistan Super League. The research approach and target sample are quite unique in context of sports leagues literature.
... Safe investments include cash and cash equivalents, like saving in a bank account, fixed deposits, recurring deposits, government bonds and debentures, life insurance, investment in gold and silver, public provident funds, and real estate -residential and commercial. Except real estate and investment in gold and silver, all other safe instruments are directly or indirectly supported and guaranteed by the central government and central regulatory authorities and are not exposed to market risk and volatility (Chandra, 2017). The risk associated with them is much less, which results in less return. ...
PurposeThis study presents research on the awareness and aspirations of millennials towards different investment asset classes with a special focus on cryptocurrencies. Cryptocurrencies are technology dependent digital money systems which have created a buzz in the financial markets in a very short period of time. Digital currencies like Bitcoin, Ethereum, Ripple, Bitcoin Cash, etc., are considered as a new investment asset category that seems to be associated with high risk and return. There are a number of advantages and disadvantages associated with them, but countries, like Japan and the US, have accepted them for some types of transaction, however, India, one of the five largest emerging economies of 2018, has still not accepted them. In spite of government and regulatory inertia towards cryptocurrencies, we have found that awareness and aspiration to invest in this category among millennials is increasing. The objective of this paper is to understand the investment attitudes of millennial investors towards the desire to invest in cryptocurrencies given the disposition of this generation towards the digital world and technologies.Study designThis study is conducted in Mumbai to assess the interest levels in this category especially among the millennial generation. This is a primary research study and data has been collected via face-to-face interviews, and a structured questionnaire, with suitable open-ended questions, involving 100 millennial retail investors in Mumbai, and a random sampling method. The participants were aware of the risk level of the selected financial products. Descriptive statistics and advance analysis techniques, such as correlation, factor and multiple regression analysis, were used as tools to describe relationships in the investment category, to decipher the pattern of the decision-making process among millennials with respect to investment in different categories of financial products.FindingsThe underlying motivation for any financial investment is growth and appreciation of value at an expected rate of return. It is this motivation that needs to be managed by any financial planner, and this is the foundational finding of our research with respect to cryptocurrencies. This study provides information to regulators, recommending adoption of cryptocurrencies within a regulated structure in India.LimitationsThis study has been conducted in Mumbai only.ImplicationsThe fundamental objective of any investment is a positive return and that positive return has to be well managed by governments, regulators and financial marketers.ContributionThis study presents new evidence given the changes that have occurred recently in the financial markets and also highlights the variables that could be determining factors of risk appetite/tolerance for millennial retail investors. It clearly highlights that financial literacy and maturity of millennial investors will drive interest levels in a particular asset class. Prior knowledge about the level of diffusion and adoption of cryptocurrencies as a new asset among Indian millennials will help in creating a relevant policy framework. This will also help in creating a society-safety network among rising digital communities. This is a potentially transparent technological solution that can facilitate many financial solutions such as investments, remittances, and innovative ways to build financial inclusion in society.
... The growth rate of gross domestic product is the most important indicator of the performance of the economy. According to Chandra (2004) the growth rate of the gross domestic product and the stock market returns have positive relationship, the higher the growth rate other things being equal, the more favourable it is for the stock market. However, this postulation differs from the results above probably owing to the fact that the Nigerian real gross domestic product has not really witnessed sustainable growth over the years due to uncoordinated and unproductive government policies. ...
This paper analyses the impact of uncontrollable risk factors on investment performance in the Nigerian Capital market applying the Arbitrage Pricing Theory. The specific objective was to examine the effect of inflation rate risk, interest rate risk, exchange rate volatility risk, money supply rate of change, real gross domestic product and treasury bill rate on investment performance in the Nigerian Capital market. We extracted thirty-year (1988-2017) panel data from Central Bank of Nigeria Statistical Bulletin and published annual reports of five quoted companies in the Nigerian Stock Exchange for investment performance proxy by price earnings ratio. Five models were specified to express the relationship between the independent variables and the dependent variable for five quoted companies in the Nigerian Stock Exchange. The models were estimated using the Ordinary Least Square Regression analysis and the global utility of the models were also evaluated. On the basis of our analysis, we found that investment performance for the Nigerian Capital market does not toe the line of the objectives of the Arbitrage Pricing Theory as the selected uncontrollable risk factors do not have significant impact on investment performance for the period under review. We therefore recommended Policy motivations aimed at managing market realities in the capital market, government to pursue prudent and transparent macroeconomic policies for the single intent to develop the capital market. Regulators and government should embark on well calculated steps geared towards curtailing the negative influences from uncontrollable risk factors affecting investment performance in the Nigerian capital market. Introduction Arbitrage pricing theory, as an alternative model to the capital asset pricing model, tries to explain asset or portfolio returns with systematic factors and asset/portfolio sensitivities to such factors. The theory estimates the expected returns of a well-diversified portfolios with the underlying assumption that portfolios are well-diversified and any discrepancy from the equilibrium price in the market would be instantaneously driven away by investors. Any difference between actual return and expected return is explained by factor surprises (differences between expected and actual values of factors). The drawback of arbitrage pricing theory is that it does not specify the systematic factors, but analysts can find these by regressing historical portfolio returns against factors such as real Gross Domestic Product growth rates, inflation changes, term structure changes, risk premium changes and so on. Regression equations make it possible to assess which systematic factors explain portfolio returns and which do not. Security returns can be predicted by factor models such as the capital asset pricing model or the arbitrage pricing theory. Note that sufficient securities are required to diversify away unsystematic risk in a portfolio. Well-functioning markets do not allow for the persistence of arbitrage opportunities as applies to well diversified portfolios. Due to lack of other assumptions multifactor models like the Arbitrage Pricing Theory allows for other (risk) factors that an asset may co-vary with and therefore enjoy increased returns which will lead to other terms in the model and there is no guidance on appropriate factors to be included in the model. However, only risk from selected factors are priced. Each new factor is self-financing and as such has a zero-net cost, the βeta on each factor represents the level of sensitivity to that particular factor.
... According to Badoo, Hammond & Oppong (2020), Public institutions are normally required to undertake risk assessment, select and develop control activities, deploys policies and procedures geared towards mitigating fraud and error. Chandra (2002) argues that institutions require establishment of modern yardsticks to regulate fraud-related risks since they are everywhere and surrounds our personal activities or professional lives. Though it is difficult to eliminate completely, one can minimize risk by employing risk assessment techniques in his personal and professional capacity. ...
The objective of the study is to examine the extent to which internal financial controls affect working capital management in Public Universities in Uganda. Working capital is vital for running of institutions because it provides the financial liquidity needed to effectively manage day-today operations. A cross-sectional research design was adopted using a quantitative approach. Data was collected from staff of Finance and Internal Audit Directorates, and heads of Departments, Schools and Colleges of Makerere University using a self- administered closed ended questionnaire. Empirical data was analyzed using descriptive statistics, Pearson’s correlation and regression tests. Findings indicate that the elements of internal financial controls which include; the control environment, risk assessment process and budget control have a positive and significant effect. The effect of control activities is not statistically significant. Therefore, Public Universities should strengthen financial control policies and procedures, risk assessment processes and budgetary control mechanisms to effectively manage working capital.
... Kumbirai and Webb (2010) observed that financial ratios are devoted to measure the performance of Commercial Banks and the ratios are also used to recognize unique bank strengths and weaknesses which provides the information of bank profitability, liquidity and credit quality. Chandra (2008) said that a study of ratios between various items or group of items in financial statement is known as financial ratio analysis. Mughal et al. (2015) compared Conventional and Islamic Banks on the basis of ROA, ROE and EPS and the result reveals that Conventional Banks are more Profitable than Islamic Banks in Pakistan in terms of ROA, ROE, and EPS. ...
The proliferation of banking sector is an indicator of economic growth in Bangladesh. Conventional Banks as well as the Islamic Banks significantly influence the national economy although there are a number of dissimilarities between the two banking systems. This study was carried out to identify the differences of Conventional and Islamic Banking sectors in terms of ratio analysis. A total of 10 banks in which 5 Conventional and 5 Islamic banks were selected for the study. Some key financial ratios were being used for the analysis. It is found from the study that the Conventional and Islamic Banks had much influence on the national economy as they hold the deposit of general public and invest the funds in profitable projects. The earnings per share (EPS), return on asset (ROA), return on equity (ROE) and return on capital employed (ROCE) were greater in Islamic Banks. It clearly indicates that the Islamic Banks were more profitable and performing a good job in the context of Bangladesh although people preferred Conventional Banking most. JEL Classification Code: G 21
This study aims to analyze the application of the Capital Asset Pricing Model (CAPM) in sharia stock investment decision making, especially JII70. The research design used is a quantitative approach. The type of research used is descriptive research. This research leads to the shares of companies included in the Jakarta Islamic Index 70 (JII70) on the Indonesia Stock Exchange. The population in this study were all shares of companies listed on the Jakarta Islamic Index 70 (JII70) in the period January 2019-January 2024. The research sample was 32 JII70 stock issuers who consistently entered JII70 during the period January 2019-January 2024. The results showed that there were 14 issuers of JII70 stocks in the efficient category because they had individual stock returns greater than the expected rate of return [Ri > E(Ri)] with positive individual returns.
This paper examines the buy and hold investment strategy, a passive approach where investors buy securities and hold them long-term regardless of market fluctuations. The rationale is that patient investors are rewarded over time despite short-term volatility. This research analyzes building and evaluating a buy and hold portfolio. First, a 12-stock portfolio across sectors is constructed using equal weighting and optimization during the Covid-19 pandemic. Equal weighting underperforms optimization that sets asset weights based on risk and return. Next, a 12-stock banking sector portfolio is built. Again, optimization improves results over equal weighting by accounting for risk and correlations. Though past performance does not guarantee future results, historically the buy and hold strategy has provided steady growth for long-term investors able to hold through downturns. Proper diversification and research are critical when constructing a buy and hold portfolio. While sacrificing potential short-term gains, this passive strategy aims to produce satisfying returns over the long run for investors with the appropriate temperament and perspective. However, the strategy may not suit those requiring active management or with lower risk tolerance.
Economic growth in Indonesia is influenced by various industrial sectors. The industrial sector that has a significant influence on Indonesia's economic growth is the food and beverage industry. The purpose of this study was to determine the effect of Return on Assets, Debt To Equity Ratio, Change of Directors, Women's Leadership, Generation Z and Family Leadership on stock prices of food and beverage companies listed on the Indonesia Stock Exchange for the period 2015 to 2020. The research sample consists of 12 companies. The analytical technique used in this research was to use the Smart PLS (Partial Least Square) software. The results found that Return on Assets, Debt To Equity Ratio, Change of Directors, Generation Z and Family Leadership have a significant influence on stock prices. meanwhile
This study aims to determine the effect of Inflation, Investment, Government Expenditure and Poverty on Economic Growth in Indonesia in 1999 - 2020. This study uses secondary data for 1999-2020 obtained from the Indonesian Central Statistics Agency, NSWI BKPM, APBN KEMENKEU. The data is analyzed using the Vector Error Correction Model (VECM). The results showed that, in the short run, inflation did not significantly affect economic growth. But in the long run it did have a positive effect on economic growth. In the short run, the investment did not affect economic growth, but in the long run it did have a positive and significant effect on economic growth. The government expenditure in the short run did not affect economic growth, while in the long run government expenditure did have a negative and significant effect on economic growth. Finally, both in short run and long run, poverty did not affect economic growth in Indonesia.
Net Asset Value (NAV) is the rational market value of a mutual fund's securities and other assets with fewer liabilities. Net Asset Value can be used as a benchmark in monitoring the results of a mutual fund. Mutual fund results and performance cannot be separated from various internal and external factors. This study purposes to analyze the character of IHSG/ IDX Composite in mediating the effect of inflation and the rupiah exchange rate on the equity mutual funds’ NAV in Indonesia during the period of 2015-2019. This study benefits panel data with path analysis techniques by using the Smart PLS. The results show that inflation influences negatively and insignificantly on Equity Mutual Funds’ NAV. IDX Composite has negative and insignificant effect on Equity Mutual Funds’ NAV, and the Rupiah Exchange Rate have the positive and significant influence on Equity Mutual Funds’ NAV. The value of the coefficient of determination is 49.8%, which means how much the Equity Funds’ NAV can be explained by Inflation, IDX Composite, and Rupiah Exchange Rate. Moreover, the remaining 50.2% is effected by other variables.
This chapter presents the various theories and models that are deployed in portfolio optimization.
Risk and return are two sides of the same coin. They always go hand in hand. Human beings, like other animals, are designed to be risk-averse (it is a survival instinct).
For most people, it is a daunting task to figure out as to where and how to invest their hard earned money.
The broad objective of this chapter is to provide the steps followed in the investment process. Starting with a brief summary of the basic concepts, it details the portfolio management process and its evaluation. The chapter covers the following topics.
Prior to the liberalization of the Indian economy in 1991, debt instruments constituted a substantial chunk of corporate financing.
A successful investment strategy would be based on the ability of the analyst to identify a security that can generate desired returns at an acceptable level of risk. It would also allow you to buy or invest in such a security when it is available at a lower/cheaper (than usual) price (in a market) and sell the same security when it is trading at a higher price (in the same or another market). This chapter focuses on the former of these aspects: the identification of a security which is intrinsically sound and can generate returns. The analysis so deployed is called fundamental analysis. The analysis undertaken for the estimation of the appropriate time to buy or sell such a security is termed technical analysis and will form the subject matter of the next chapter. Both these analyses are conducted to select appropriate financial instruments, whether debt or equity, based on the risk–return profile of the investor.
The aim of the research presented in this paper is to investigate the perceived investment risk of individual investors. These studies were carried out in Coimbatore district with 428 individual investors. The risk perception of investors were analysed and results were identified. The findings may support the individual investors and motivate common individuals to invest more in the share market. This study also supports the financial consultants and brokers to take decisions in their normal course of activities. In this study, participants were asked to rate the risk perception towards equity investment and the relationship between risk perception and the investment pattern of equity investors.
Despite the major role played by rural and community banks in economic development and in the financial climate, their performance over a decade now has not been up to expectations. They continue to experience huge challenges due to innovations in technology as well as globalization which create opportunities for growth. The study was to examine the impact of liquidity on rural and community banks in the Eastern Region of Ghana selected from eleven (11) banks for the period of ten years from 2007-2016. The study used panel research design that employed secondary data to collate the ratios from all the selected rural and community banks. A regression model was developed with Return on Asset as the dependent variable accompanied with other six explanatory variables. It was revealed that quality of loan portfolio ratio; capital ratio and loan to total assets had significant and positive relationship with profitability. It was also revealed that shocks in all the liquidity variables had one or other implications on profitability. Finally, based on finding seven, which states that cost to income has negative and significant effect on profitability, the study recommended that management must adopt information and communication technology to reduce cost and easy access to banks' product in the form of Automated Teller Machine.
Objective - Stock is one securities among other securities, as a high risk instrument. Stock classified as high risk due to reflection in the uncertainty of the rate of return to be received by investors in the future. The purpose of this research is to examine of financial distress as measured by the Altman Z-Score, systematic risk as measured by beta stocks and macroeconomic measured by inflation on stock returns Manufacturing Company listed on the Stock Exchange 2008-2012 period Methodology/Technique - From 133 companies listed, 75 companies are taken as sample by using purposive sampling technique. Panel data regression analysis shows that the overall effect of variables is equal to 28.7%. Findings - Partially, the variables that affect the stock returns are financial distress with Altman Z-Score, beta stocks and inflation. Novelty - Financial distress with the measurement using the Altman Z-Score. Type of Paper: Empirical Keywords: Stock return; Financial distress; Altman Z-Score; Systematic risk; Beta stocks and Inflation JEL Classification: E44, F14, G01.
Within the paper, the problem of globalisation during financial crises is analysed. The research is based on the Forex exchange rates. In the analysis, the power law classification scheme (PLCS) is used. The study shows that during crises cross-correlations increase resulting in significant growth of cliques, and also the ranks of nodes on the converging time series network are growing. This suggests that the crises expose the globalisation processes, which can be verified by the proposed analysis.
Investment means sacrificing some money value in the present with the expectation of making gains in the future. Every investor is interested in knowing the appropriate timing for investment and the best avenue for investment. For investing the surplus money, the investor should be willing to pay an absolute value for the stock. To know about the real value of the stock is not easy for the investor. Simultaneously, it is not so easy to find out the real worth of the company stock. Specific analyses can be used to select the stock for investment, like Fundamental analysis and Technical analysis. Thus, this research work is done to facilitate the investor to know about the stock's worth value for investment. This research paper aims to arrive at the intrinsic value of shares.
Key Words: Dividend per share, D/P ratio, Earning Per Share, Fundamental Analysis, Intrinsic value, and Price Earnings Ratio.
The absolute risk of a security can be bifurcated into systematic and unsystematic risk. The latter is eliminated by more and more diversification. On the other hand, the systematic risk cannot be eliminated and correlated with the market. A stock is efficient if there is no unsystematic risk. Therefore, the only effect security has on the market risk is through its systematic risk; by calculating systematic risk, one cannot conclude whether securities are exactly priced or not. CAPM helps to identify the qualitative assets which are under-priced or over-priced. Thus, selecting the stock is become a challenge to get the expected return by the investor. For facilitating the investor for the selection of right-priced stocks, this research is done with the help of CAPM with respect to NSE NIFTY stocks.
Key Words: NSE NIFTY, CAPM, Beta, Risk, and Return
Investment decisions are made keeping in view the return and risk factors in mind. Every investment decision involves the effective use of funds for future growth of funds. An investors decision to make investment requires a careful analysis of prevailing condition and future prospects of market. Investment decision basically taken by investors depends upon the various factors. Normally investment decision is an attempt to plan properly, evaluate and allocate funds into various investment outlets that ensure investors safety and expected rate of return. Investors decision toward buying, selling and to keep/hold on particular security depend upon the various factors that affect the stock market. Present chapter deals with the factors that are taken into account while making investment in stock market.
The capital market has an important role in the economy of a country, as it serves as a source of funds for the company as well as a source of investment for the community. Bonds are financial instruments or securities that show that bond issuers have the obligation to pay the coupons and pay off the underlying debt at the appointed time. This research focuses on financial risk that is a financial ratio consisting of profitability and liquidity. This research aims to determine the impact of profitability and liquidity on bond rating and the impact on the bond yield on non-financial companies listed on the Indonesia Stock Exchange (IDX) period 2014-2018. The methods used are descriptive and verificative. The sampling technique used in this study was Purposive Sampling. The number of companies being sampled in this study was 33 companies. This study uses the path analysis method to determine which variables have an influence on bond ratings and their impact on bond yield. The results showed that the variable profitability had a significant effect on bond ratings, liquidity had no significant effect on bond ratings, and bond ratings were significantly influential on bond yield
This study examined the effect of foreign portfolio investment on the performance of Nigerian capital market. The specific objectives are to investigate the impact of Net Foreign Portfolio Investment, Foreign Portfolio Investment in Equity, Foreign Portfolio Investment in Bonds, Foreign Portfolio in Government Securities and Nigerian Exchange Rate per US Dollar on the performance of Nigerian Capital Market. The required data were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin and Stock Exchange Annual Report. The study has All Share Price Index and Market Capitalization as proxy for Capital market performance while Net Foreign Portfolio Investment (NFPI), Equity Investment (PIE), Bond Investment (PIB), Portfolio Investment in Government Securities (PIGS) and Exchange Rate as predictors variables. The Ordinary Least Square multiple regressions with econometric view were used as data analysis techniques. Cointegration test, Granger Causality Test, Augmented Dickey Fuller Test and Error Correction Model were used to examine the variables and its relationship to the dependent variables. Model one revealed that foreign portfolio investment in bonds and foreign portfolio investment in government securities have negative relationship with All Share Price Index while Net Foreign Portfolio investment, foreign portfolio investment in equities and exchange rate have positive relationship with All Share Price Index. Model two revealed that Net Foreign Portfolio Investment, Portfolio Investments in Bonds and Government securities has negative relationship with market capitalization while equity investment and exchange rate have positive relationship with market capitalization. The study concludes that foreign portfolio investment have significant relationship with Nigerian capital market performance. It therefore recommends that policies should be devised to enhance the operational efficiency of the Nigerian capital market, to attract foreign investors.
ResearchGate has not been able to resolve any references for this publication.