scholarly journals Global Portfolio Diversification and Equity Market: Evidence from Trading Partners of Pakistan

2018 ◽  
Vol 6 (1) ◽  
pp. 20-34
Author(s):  
Muhammad Husnain ◽  
◽  
Ume Habiba ◽  
Shahnaz Arifullah ◽  
Izhar Muhammad ◽  
...  
Keyword(s):  
Portfolio Management ◽  
Equity Markets ◽  
Equity Market ◽  
Portfolio Diversification ◽  
Weekly Basis ◽  
Policy Makers ◽  
Trading Partners ◽  
Portfolio Managers ◽  
Asset Classes

The influential work of Markowitz (1952, 1959) provides foundation to modern investment philosophy. Investors can reap the potential benefit of portfolio diversification only if the involved asset classes in investment basket are not perfectly correlated. Objective of this study is to empirically investigate the cointegration among equity market of Pakistan and its major trading partners (China, France, Germany, Hong Kong, Japan, Korea, Malaysia, UK and USA). Sample period of study starts from 2004 to 2015, on weekly basis. Bivariate cointegration (Johansen, 1991, 1995) analysis reveals that equity market of Pakistan has no long term relationship with any of the equity markets of its major trading partners. Therefore, we recommend to potential investors, portfolio managers, and policy makers that prospective benefit of portfolio diversification can be achieved by investing in the equity markets of major trading partners of Pakistan. Further, they should be vigilant regarding the co-movement among equity markets during portfolio management decisions.

Unveiling the diversification benefits of Islamic equities and commodities

2018 ◽  
Vol 44 (6) ◽  
pp. 830-850 ◽  
Author(s):  
Muhammad Rizky Prima Sakti ◽  
Mansur Masih ◽  
Buerhan Saiti ◽  
Mohammad Ali Tareq
Keyword(s):  
Crude Oil ◽  
Time Series Data ◽  
Portfolio Diversification ◽  
Series Data ◽  
Content Type ◽  
Trading Partners ◽  
The Usa ◽  
Portfolio Managers

PurposeThe purpose of this paper is to examine the extent to which the IndonesianShariahcompliant investors can benefit from the portfolio diversification with the Islamic indices of its trading partners and selected commodities such as gold, crude oil, and cocoa.Design/methodology/approachThe authors use daily time series data covering both Islamic and commodity indices starting from June 4, 2007 until December 30, 2016 by the application of multivariate-generalized autoregressive conditional heteroscedastic and continuous wavelet analysis.FindingsThe findings tend to indicate that investors with exposure inShariahcompliant indices of Indonesia and wanting to gain more diversification benefits should invest either in the USA or India Islamic equity. Instead, the greater benefits will be obtained byShariahcompliant investors if they invest in the USA Islamic indices during long-term investment horizons. If investors want to invest in medium investment horizons, investing in India Islamic equity is a viable option. The findings further suggest that gold has a role of diversification benefits as a “safe haven” instrument for investors. It is advisable for the investors that have exposure in commodities (gold, crude oil, and cocoa) and want to invest in Indonesian Islamic equity, they should hold the portfolio for not more than 16 days to gain diversification benefits.Originality/valueThe results of this study are expected to have crucial implications for the IndonesiaShariahcompliant investors and portfolio managers because it will help them to understand portfolio diversification benefits with different stock holding periods or investment horizons.

scholarly journals International portfolio diversification: United States and south Asian equity markets

2014 ◽  
Vol 61 (2) ◽  
pp. 241-252 ◽  
Author(s):  
Rizwan Mushtaq ◽  
Zulfiqar Shah
Keyword(s):  
Stock Market ◽  
South Asian ◽  
Equity Markets ◽  
Equity Market ◽  
Causality Test ◽  
Market Index ◽  
International Portfolio Diversification ◽  
The Us ◽  
Short And Long Term

This paper explores the dynamic liaison between US and three developing South Asian equity markets in short and long term. To gauge the long-term relationship, we applied Johansen co-integration procedure as all the representative indices are found to be non-stationary at level. The findings illustrate that the US equity market index exhibits a reasonably different movement over time in contrast to the three developing equity markets under consideration. However, the Granger-causality test divulge that the direction of causality scamper from US equity market to the three South Asian markets. It further indicates that within the three developing equity markets the direction of causality emanates from Bombay stock market to Karachi and Colombo. Overall, the results of the study suggest that the American investors can get higher returns through international diversification into developing equity markets, while the US stock market would also be a gainful upshot for South Asian investors.

Return and volatility spillovers between Bitcoin and other asset classes in Turkey

2019 ◽  
Vol 14 (3) ◽  
pp. 209-220 ◽  
Author(s):  
Gulin Vardar ◽  
Berna Aydogan
Keyword(s):  
Spillover Effects ◽  
Portfolio Diversification ◽  
Volatility Spillover ◽  
Policy Makers ◽  
Content Type ◽  
Empirical Results ◽  
Volatility Spillovers ◽  
Regulatory Bodies ◽  
Asset Classes ◽  
Econometric Technique

Purpose With a substantial return and volatility characteristic of Bitcoin, which may be seen as a new category of investment assets, better understanding of the nature of return and volatility spillover can help investors and regulators in achieving the potential goal from portfolio diversification. The paper aims to discuss these issues. Design/methodology/approach This paper explores the return and volatility transmission between the Bitcoin, as the largest cryptocurrency, and other traditional asset classes, namely stock, bond and currencies from the standpoint of Turkey over the period July, 2010–June, 2018 using the newly developed multivariate econometric technique, VAR–GARCH, in mean framework with the BEKK representation. Findings The empirical results reveal the existence of the positive unilateral return spillovers from the bond market to Bitcoin market. Regarding the results of shock and volatility spillovers, there exists strong evidence of bidirectional cross-market shock and volatility spillover effects between Bitcoin and all other financial asset classes, except US Dollar exchange rate. Originality/value The important extention is the adoption of a newly developed multivariate econometric technique, VAR–GARCH, in mean framework with the BEKK representation, proposed by Engle and Kroner (1995), which is employed for the first time specifically to examine the extent of integration in terms of volatility and return between Bitcoin and key asset classes. Second, Bitcoin has experienced a rapid growth since around a decade and a number of investors are showing interest in its potential as an integrative part of portfolio diversification. The information provided by empirical results gives empirical bases from which to address topics concerning hedging purposes and optimal portfolio allocation. It is also increasingly important to analyze the current behavior of Bitcoin in relation to other assets to provide policy makers and regulatory bodies with guidance on the role of the Bitcoin as an investment asset in Turkey. Thus, this is the first serious attempt at exploring the potential for Bitcoin to offer diversification opportunities in the context of Turkey.

The Diminishing Benefits Of Nae International Portfolio Diversification Following The 1997 Asian Financial Crisis

2011 ◽  
Vol 5 (4) ◽  
Author(s):  
David S. Krause ◽  
George W. Kutner
Keyword(s):  
Financial Crisis ◽  
Portfolio Management ◽  
Asian Financial Crisis ◽  
Portfolio Diversification ◽  
International Equity Markets ◽  
International Portfolio Diversification ◽  
Monthly Return ◽  
International Portfolio ◽  
International Equity ◽  
Portfolio Managers

Nae international diversification has been fundamental to portfolio management over the past 30 years, but the benefits appear to be significantly diminished following the 1997 Asian financial crisis. Using monthly return data covering the period from 1970 through 2004, we found rising correlations between U.S. and international equity markets exceeding 0.85 since July 1997. Even the return correlation of emerging countries recently has reached almost 0.80. We also found a significant reduction in the variance of the international return correlation after the financial crisis. Portfolio managers should not expect to receive the same benefits from international portfolio diversification as that obtained prior to the Asian financial crisis.

Cross-country evidence of Islamic portfolio diversification: are there opportunities in Saudi Arabia?

2019 ◽  
Vol 45 (1) ◽  
pp. 36-53 ◽  
Author(s):  
Md Hakim Ali ◽  
Md Akther Uddin ◽  
Mohammad Ashraful Ferdous Chowdhury ◽  
Mansur Masih
Keyword(s):  
Saudi Arabia ◽  
Wavelet Transforms ◽  
Saudi Arabian ◽  
Portfolio Diversification ◽  
Discrete Wavelet ◽  
Policy Makers ◽  
Content Type ◽  
International Portfolio Diversification ◽  
Trading Partners ◽  
Cross Country

Purpose On the backdrop of growing importance of Shariah compliant equity markets, the purpose of this paper is to study cross-country portfolio diversification benefits for investors with major trading partners of Saudi Arabia, namely, USA, China, Japan, Germany and India, who have already invested or tend to invest in Saudi Arabian stock market. Design/methodology/approach The authors have investigated time invariant, dynamic correlations at different investments horizons of the investors among Islamic asset classes by applying relevant econometric techniques like multivariate generalized autoregressive conditional heteroscedastic –DCC and continuous wavelet transforms. For robustness, this study also applied maximal overlap discrete wavelet transform. Findings The findings tend to indicate that the Saudi Arabian investors have portfolio diversification benefits with all major trading partners in the short-term investment horizon. Interestingly, Saudi Arabian market has the least portfolio diversification benefits with the Chinese market. However, in the long run, all markets are correlated, yielding minimum portfolio diversification benefits and most importantly Saudi Arabian investors have portfolio diversification benefits with the Indian Islamic equity market in almost all investment horizons. The findings are highly consistent across different econometric technique estimations. Research limitations/implications The authors are only considering five major trading partners of Saudi Arabia. Also, the authors are using S&P and FTSE shari’ah index. Moreover, the time period of the study is constrained by the availability of shari’ah indices. Econometric limitations are also well documented in the literature. Practical implications The results could be beneficial for the investors, portfolio managers, hedge fund managers and institutional investors and also could be useful for the policy makers in their policy-making decisions. Originality/value Only very few studies have looked into the benefits of international portfolio diversification from the perspective of local investors as well as the portfolio diversification benefits with the major trading partners of Saudi Arabia. One of the novelties of the method is to make the stock investors, practitioners and policy makers aware of the portfolio diversification benefits available at different time scales such as 4, 8, 16, 32, 64 and 256 trading days as investment holding periods to unveil the true dynamics of co-movement between those different assets.

scholarly journals Dynamic correlation analysis in the ASEAN equity markets during 2009–2018

2019 ◽  
Vol 16 (2) ◽  
pp. 249-259
Author(s):  
Vesarach Aumeboonsuke
Keyword(s):  
Equity Markets ◽  
Multivariate Garch ◽  
Policy Makers ◽  
Dynamic Correlation ◽  
Dynamic Correlations ◽  
Vec Model ◽  
The Us ◽  
Trading Partners ◽  
International Investors ◽  
Mean Variance Portfolio

This study examines the static and dynamic correlations in the ASEAN equity markets. The importance of this research appears from the fact that practitioners can get the benefit if their investments yield the same or higher returns given lower or the same risk in their portfolio. Firstly, this advantage comes from including the assets that decrease volatility of the portfolio. Hence, the correlation between the ASEAN markets should be examined. Secondly, co-movements in market realizations may increase global financial instability. Its existence is important for international investors, financial institutions, and policy makers. The study locates the relationship between ASEAN and its major trading partners, including Japanese, US, and UK markets, in order to find more rational results. This study utilizes alternative multivariate GARCH forms to provide useful information on the dynamic evolution and implications of return volatilities. The results show that the volatilities of all the equity markets under study are persistent over time. The estimates from VEC model indicate that the movements of the US and UK equity market returns have some degree of influence on several of the ASEAN equity markets. The results imply that, first, most of the developing ASEAN equity markets work by its own information with small relation to the developed world. Second, it is still convincing to state that investing in ASEAN equity markets should provide investors a better mean-variance portfolio. And, third, buy-and-hold strategy seems to be more beneficial than readjusting the ASEAN equities portfolio.

Correlation of Uncorrelated Asset Classes

2008 ◽  
Vol 9 (2) ◽  
pp. 1-12
Author(s):  
Jeffry Haber ◽  
Andrew Braunstein
Keyword(s):  
Portfolio Theory ◽  
Portfolio Diversification ◽  
Random Numbers ◽  
Statistical Measure ◽  
Modern Portfolio Theory ◽  
Investment Return ◽  
Key Driver ◽  
Asset Classes

Diversification of a portfolio has long been held as one of the cornerstones of modern portfolio theory and a key driver of investment return over the long term. Correlation is the statistical measure used to quantify diversification. The degree to which asset classes correlate will determine the degree of portfolio diversification (or lack thereof). Many investment products are being sold that claim of correlation utilizing two series of random numbers, as well. For and misleading.

Issues in Benchmarking Commodity Performance

2018 ◽  
Author(s):  
Aaron Filbeck
Keyword(s):  
Institutional Investors ◽  
Portfolio Diversification ◽  
Exchange Traded Funds ◽  
Barriers To Entry ◽  
Index Funds ◽  
Asset Class ◽  
Asset Classes ◽  
Alternative Sources ◽  
The Many

Commodity investments have continued to gain traction in diversified portfolios since the 1990s. Historically low correlations relative to traditional asset classes, different fundamental drivers, and investor demand for alternative sources of return have brought commodity investments forward as a solution that provides overall portfolio diversification while maintaining similar long-term return streams. A large inflow of institutional investors and noncommercial traders has increased demand and lowered barriers to entry. Many of these investors simply want exposure to commodities as an asset class, often investing in index funds or exchange-traded funds (ETFs). In some cases, investors assume that the underlying commodity indexes that these investment vehicles track represent appropriate benchmarks asset class performance. In reality, the many different commodity indexes available make benchmarking asset class performance more difficult.

scholarly journals The Dynamic Linkages among Sector Indices: The Case of the Egyptian Stock Market

2016 ◽  
Vol 8 (4) ◽  
pp. 23
Author(s):  
Walid M. A. Ahmed
Keyword(s):  
Equity Market ◽  
Cointegration Analysis ◽  
Portfolio Diversification ◽  
Causality Analysis ◽  
Short Term ◽  
Cointegrating Vector ◽  
Short Run ◽  
Investigation Period ◽  
The Empirical Analysis

<p>The main thrust of this study is to investigate both the long-term and short-term links among sectors of the Egyptian equity market. The empirical analysis is carried out using Johansen’s multivariate cointegration analysis and Granger’s causality analysis. The investigation period extends from 3 April 2011 to 31 May 2015. The results of cointegration analysis indicate that there exists a single cointegrating vector within the sample sector indices. The Granger’s causality analysis shows that the short-term causal relationships between the sector indices are substantially limited and, where they exist, practically unidirectional. By and large, an important implication of these findings is that there is still possibility to obtain gains from portfolio diversification in the short run. Nonetheless, investors with long-term horizon might not be able to benefit from diversifying into the various sectors of the Egyptian market.</p>

scholarly journals The analysis of investment into industries based on portfolio managers

2021 ◽  
pp. 161-170
Keyword(s):  
Mutual Funds ◽  
Portfolio Management ◽  
Investment Strategy ◽  
Joint Stock Company ◽  
Stock Company ◽  
Expected Return ◽  
Government Bonds ◽  
Self Interest ◽  
Portfolio Managers

The main goal of each investor when investing capital is to recover funds. The current market brings unlimited opportunities in creating an investment strategy. This strategy is highly dependent on the investor's preferences, his attitude to risk, financial capacity, expected return, self-interest, and many other factors that determine what is best for the investor. For this reason, the submitted work concerns investors who will comply with strict restrictions. In this way, an investment strategy for a selected group of investors can be created. The paper focuses on investors in Slovakia. The art of investment decisions to make the greatest possible return is portfolio management. The studies presented in this work are designed to explore different models and to achieve investor goals to maximise their investment and minimise risk. Investing is a systematic and long-term process where the investor gives up part of his free funds to increase their value and collect the return for them in the future. Investing is effective only if it follows certain rules. Sending a monthly deposit with iron regularity is, in the event of a recession and crisis, the only guarantee of achieving the desired future goal of investing. Mutual funds are a simple way of collective investment, where a person collects money from investors and invests in various assets such as stocks, government bonds, currencies, commodities. Profits from the investment are distributed to all investors who contributed to the fund. These funds are professionally managed by investment specialists based on their market knowledge. A share is equity security representing an equity interest in a joint-stock company. Monetary policy and financial stress significantly affect the ability of the actively managed fund's performance vis-a-vis ETFs performance. This fact must be stated as this is a limitation of the analysis in the presented paper.

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