Portfolio Performance Measures Research Articles

Is the performance of shares in the stock market affected by monetary policy change and the transmission channel of exchange rate? - The case of Turkey

In this study, in case that the objectives are price and financial stability, it is investigated whether the transmission channel based on exchange rate due to changes in monetary policy affects the performance of shares due to external debt stock. Borsa Istanbul is chosen as the stock market and the performance of nine sectors is examined during the high and low foreign exchange rate periods due to monetary policy change. The performance of the sectors is defined by portfolio performance measurement methods, and the TOPSIS (Technique for Order Preference by Similarity to Ideal Solution) analysis based on entropy is used for multi-criteria decision making. It is concluded that the monetary policy change affects the performance of the sectors, which constitutes a substantial proportion of external debt stock.

Constructing an Optimal Portfolio with a Single Index Model on the Shares of Bumn Companies Listed in the IDXBUMN20 Index on the Indonesia Stock Exchange

This study aims to determine the optimal portfolio using a single index model on the shares of state-owned companies listed in the IDXBUMN20 index on the Indonesia Stock Exchange. The population was 20 issuers and using purposive sampling, 13 issuers were obtained as samples. By using a single index model, the results show that 7 stocks make up the optimal portfolio with the proportion of funds as follows ANTM (27.52%), BBNI (24.02%), PTBA (17.86%), BMRI (15.08%), TINS (7.51%), BBRI (7.45%) and PGAS (0.56%). Measurement of portfolio performance using the Treynor method of 0.17233 is higher than market performance which has a value of 0.01441.

Efficiency of Mutual Funds and Portfolio Performance Measurement: A Case of Selected Mutual Funds in Tanzania

This study examines the current efficiency trends in the Tanzanian mutual fund industry over a five-year span (2018-2022), focusing on six specific funds: Umoja Fund, WekezaMaisha, Watoto Fund, Jikimu Fund, Liquid Fund, and Bond Fund. Employing a non-parametric approach, specifically Data Envelopment Analysis (DEA), the research collects secondary data from diverse sources, including newspapers, journals, books, periodicals, and the websites of UTT and the Bank of Tanzania (BOT). Monthly Net Asset Values (NAVs) of the selected mutual funds are scrutinized from each scheme's inception. Motivated by the limited understanding of mutual fund efficiency in Tanzania despite reported successes in increased asset values, profitability, and investor numbers, the study reveals distinctive performances under Constant Returns to Scale (CRS) and Variable Returns to Scale (VRS) assumptions. Under VRS, all mutual funds consistently achieve nearly 100% efficiency, signifying optimal operational scales. However, under CRS, efficiency scores fluctuate over time, underscoring the importance of mutual funds' adaptability for enhanced efficiency. Furthermore, the research suggests that mutual fund size significantly influences efficiency and potential scale economies. Smaller mutual funds demonstrate superior resource utilization efficiency, attributed to their focused investment approach. The analysis of inputs and output slacks provides insights into efficiency and resource utilization, identifying areas of optimal resource management and highlighting opportunities for improvement. The findings offer valuable insights into mutual fund efficiency under different scale assumptions, emphasizing the importance of scale flexibility and efficient resource management for superior performance. Implications suggest avenues for further research to explore external factors, efficiency fluctuations, portfolio management practices, and longitudinal trends within the mutual fund industry.

Enhancing portfolio resilience during crisis periods: Lessons from BRICS indices and multi asset strategies

This paper uses Markowitz’s mean-variance model to construct an investment portfolio incorporating multiple assets – BRICS equity indices, Gold, crude oil, bonds, and cryptocurrencies. The optimally created risky portfolios outperform alternative portfolio optimization methods – the naive portfolio and the equal risk contribution portfolio; and established indices – the S&P 500 and the MSCI Emerging Equity Index in terms of metrics – adjusted Sharpe ratio, modified Sharpe ratio, and the modified Value at Risk. The findings are validated across different periods, including the COVID-19 period and the Russian invasion of Ukraine, including various in and out of sample periods. The findings highlight the benefits of portfolio diversity, mainly using BRICS indices, Gold, and Brent Crude oil, and challenge the notion of limited diversification benefits in BRICS indices found in previous studies. This paper further suggests the potential of emerging market bonds ETF as a diversification option during turbulent economic periods and highlights the limitations of cryptocurrencies in optimizing multi asset portfolios. By adopting the recommended multi asset portfolios, investors can enhance their risk-return trade-offs and achieve superior performance compared to the S&P500 and MSCI emerging indices. Lastly, the paper recommends future research opportunities in measuring portfolio performance and hedging strategies considering risk-adjusted return measurements, transaction expenses, and dynamic rebalancing techniques.

Portfolio Optimization Based on 5 Hong-Kong Stocks

The recent fluctuations in interest rates in the Hong Kong stock market have sparked a significant amount of attention, prompting investors to further intensify their research into portfolio optimization strategies. To determine the most suitable investment plan, this study carefully selected five Hong Kong stocks based on their market capitalization. Predictive data were utilized for portfolio optimization, with the mean-variance analysis framework used to measure portfolio performance. Our model revealed that asset allocation of 2800.HK held the highest proportion in the minimum variance model, with the five stocks holding ratio of 0.119952, 0.000517, 0.067936, 0.030762, and 0.822611 separately. The average cumulative return using mean variance on the testing dataset was 1.091263. The final findings of this study may be useful to investors seeking to optimize their investments in the Hong Kong stock market. The insights gained from this research could help investors make better decisions and achieve improved returns.

Portfolio performance under benchmarking relative loss and portfolio insurance: From omega ratio to loss aversion

AbstractWe study an optimal investment problem under a joint limited expected relative loss and portfolio insurance constraint with a general random benchmark. By making use of a static Lagrangian method in a complete market setting, the optimal wealth and investment strategy can be fully determined along with the existence and uniqueness of the Lagrangian multipliers. Our numerical demonstration for various commonly used random benchmarks shows a trade-off between the portfolio outperformance and underperformance relative to the benchmark, which may not be captured by the widely used Omega ratio and its utility-transformed version, reflecting the impact of the benchmarking loss constraint. Furthermore, we develop a new portfolio performance measurement indicator that incorporates the agent’s utility loss aversion relative to the benchmark via solving an equivalent optimal asset allocation problem with a benchmark-reference-based preference. We show that the expected utility performance is well depicted by looking at this new portfolio performance ratio, suggesting a more suitable portfolio performance measurement under a limited loss constraint relative to a possibly random benchmark.

Portfolio Evaluation with the Vector Distance Based on Portfolio Composition

We propose a novel portfolio evaluation method, a distance-based approach, which directly evaluates the portfolio composition rather than portfolio returns. In this approach, we consider a portfolio as an estimator for an in-sample tangency portfolio, which we define as the optimal reference portfolio. We then evaluate the portfolio by computing its vector distance to the optimal reference portfolio. In search of the proper distance-based performance measure, we choose four representative vector distances and compare their suitability as a new portfolio performance measure. Through extensive statistical analysis, we find that the Euclidean distance is the most proper distance-based performance measure of the four representative vector distances. We further verify that a portfolio with a large Euclidean distance is not desirable because not only does it provide a low utility implied by the first four moments of portfolio returns, but also it is not likely to maintain its long-term performance. Hence, the Euclidean distance can complement the return-based performance measures by confirming the reliability of a portfolio in its investment performance.

The Concentration Risk Indicator: Raising the Bar for Financial Stability and Portfolio Performance Measurement

The Concentration Risk Indicator: Raising the Bar for Financial Stability and Portfolio Performance Measurement

PERFORMANCE EVALUATION OF BANK EQUITY UMBRELLA FUNDS IN TURKEY

The most important objectives in portfolio management are to have the highest average return at a certain level of risk and to eliminate the unsystematic risk through diversification. Measuring the performance of their portfolios has an important place in investment decisions for investors who want maximum return for a certain risk. In order to measure portfolio performance, there are three basic methods; Sharpe Ratio, Treynor Ratio and Jensen’s Alpha performance indices. In this study, the performance of 30 equity umbrella funds of banks between May 2015 and April 2020 was evaluated. According to the results, the performances of the three indices are listed in descending order. When the funds with the highest returns in three performance indices are analyzed, Yapı Kredi Asset Management Foreign Technology Sector Equity Fund in both Sharpe index and Treynor Index, and Yapı Kredi Asset Management BIST Dividend 25 Index Equity Fund in Jensen index are the funds with the highest performance. In addition, when the rank correlation coefficients calculated to reveal the relationships between the indices were examined, it was seen that the correlation levels were high

Pengukuran Kinerja Portofolio Investasi Dengan Menggunakan Indeks Sharpe Pada Emiten Sektor Transportasi Dan Logistik Yang Terdaftar Di Bursa Efek Indonesia Sebelum Dan Selama Masa Pandemic Covid - 19

The term portfolio is often used to provide an understanding of a set of investments owned by investors in various types of investment instruments such as bonds, mutual funds, stocks, properties, and so on. To measure whether the portfolio carried out by investors has provided an optimal level of return, investors need to measure the performance of their placed investments. The Transportation & Logistics sector is expected to experience a negative impact due to the COVID-19 pandemic. The main problem in this study lies in measuring portfolio performance for companies that are included in the Transportation & Logistics Sector where portfolio performance before the Covid pandemic will be compared with portfolio performance during the Covid pandemic. The purpose of this study is to test and analyze whether the increase or decrease in the Transportation and Logistics Sector stock index is caused by differences in portfolio performance before and during the Covid pandemic. The research method used in this case is a quantitative descriptive method. Data analysis methods in this study include normality test followed by paired sample t-test (if normally distributed) and Wilcoxon test (if not normally distributed). The results showed that there were no significant differences regarding the performance of stock portfolios for companies listed in the Transportation and Logistics Sector during the COVID-19 pandemic when compared to the stock portfolio performance in the period before the COVID-19 pandemic.

Bagged Pretested Portfolio Selection

This article exploits the idea of combining pretesting and bagging to choose between competing portfolio strategies. We propose an estimator for the portfolio weight vector, which optimally trades off Type I against Type II errors when choosing the best investment strategy. Furthermore, we accommodate the idea of bagging in the portfolio testing problem, which helps to avoid sharp thresholding and reduces turnover costs substantially. Our Bagged Pretested Portfolio Selection (BPPS) approach borrows from both the shrinkage and the forecast combination literature. The portfolio weights of our strategy are weighted averages of the portfolio weights from a set of stand-alone strategies. More specifically, the weights are generated from pseudo-out-of-sample portfolio pretesting, such that they reflect the probability that a given strategy will be overall best performing. The resulting strategy allows for a flexible and smooth switch between the underlying strategies and outperforms the corresponding stand-alone strategies. Besides yielding high point estimates of the portfolio performance measures, the BPPS approach performs exceptionally well in terms of precision and is robust against outliers resulting from the choice of the asset space.

Analisis Perbandingan Portofolio Optimal Single Index Model dan Metode CATM Menggunakan Indeks Pengukur Sharpe, Treynor, dan Jensen (Studi Kasus Saham Jakarta Islamic Index) Pada Masa Pandemi Covid 19

Investment is the investment of funds to earn profits in the future. The higher the expected rate of return, the higher the risk that will be faced. To minimize the level of risk and maximize the rate of return, an optimal portfolio is formed. The models that can be used to form an optimal portfolio are the Single Index Model and the Capital Asset Pricing Model (CAPM). This study aims to analyze the comparison of the optimal portfolio of Jakarta Islamic Index shares during the Covid-19 pandemic with the Single Index Model and CAPM and to measure the optimal portfolio performance formed by measuring indexes, namely Sharpe, Treynor, and Jensen. Based on the analysis of the optimal portfolio performance measurement shows that the optimal portfolio formed by the CAPM method has a better performance than the Single Index Model.

Formulating Cryptocurrencies Dynamic Portfolio with Consumption Sectors’ Stocks

This study was conducted to analyze the performance of the portfolio formed with different asset classes. The instrument used is the consumption sector index with 5 cryptocurrencies. Does the formed portfolio have a better performance than the portfolio that is only formed from the consumption sector index. The type of data in this study uses secondary data in the form of a daily frequency time series with a research period from January 2019 to January 2021. The data in this study used quantitative data. Portfolio performance measurement in this study was measured using the ratio of Sharpe, Treynor, Jensen, Sortino, and Omega. Based on the results of the study, it shows that the performance of the consumption sector index portfolio that is hedged with cryptocurrency produces a higher rate of return in the period during the pandemic than in the period before the pandemic. However, there is 1 crypto that produces negative values in each ratio and research period, namely Tether. Overall, the results of this study can be concluded that adding cryptocurrency to the formation of a portfolio will get a better portfolio performance<em>.</em>

Risky Portfolio Efficient Frontier & Performance: Bayesian versus Frequentist


 
 
 
 The location of the Efficient Frontier in Expected Portfolio Return (Rp) / Portfolio Standard Deviation (Sp) space depends on what kind of summary estimates are utilized by the investor. By relying on Bayesian and Frequentist summary measures, in conjunction with a 5-stock portfolio of non-volatility free stocks, analysis in this paper proves that use of reliable Bayesian estimates (estimates that are not sensitive to prior distributions) (a) causes the locus of the Efficient Frontier to appear higher than, and to the right of, the one constructed on Frequentist geometric measures, and (b) generates improved measures of portfolio performance. Additionally, it is demonstrated that the decision of the investor to rely on simple (arithmetic or sample) summary measures describing non-volatility-free assets, would cause the Efficient Frontier to appear above the Bayesian, implying overoptimism. It is concluded that Bayesian estimates, that are not sensitive to mistaken prior distributions, take the investor closer to truer performance levels.
 
 
 

MAKING A COMPELLING CASE FOR ESG & ISLAMIC FUNDS: AN EMPIRICAL INVESTIGATION IN COMPARISON WITH CONVENTIONAL FUNDS

The purpose of this research is to analyze and evaluate the performance of ESG funds and Islamic funds vis-à-vis conventional mutual funds, whereby ESG funds and Islamic funds take into account environmental, social, governance and Shariah-based factors into account during portfolio structuring. To conduct this study, the approach primarily employed the publicly available data of thirty funds from each aforementioned category, calculated their logarithmic returns based on closing prices and subsequently ranked the funds according to the returns. Ten of the top-ranking funds were then selected (owing to some limitations of market data availability) for the methodology to calculate performance using descriptive statistics, one-sample t-tests, portfolio performance measures (Sharpe ratio, Treynor ratio, Jensen’s Alpha) and the well renowned Fama-French three-factor model. The results show that much of the excess returns across a majority of the funds (in all categories) are largely explained by the market premium, while the fund manager skill, SMB and HML factors do not lend much weight in explaining the excess returns attributable to the funds. Furthermore, a considerable finding of this study is that ESG and Islamic funds are not underperforming, but exhibit resilience, and has the potential to evolve and become mainstream options for investments.

Portfolio Based Style Analysis of Equity Mutual Funds in Pakistan

The investment style has become a prominent concept in investment management. The researcher highlights the significance of selecting the right style benchmarks and the use of unsuitable style benchmarks an erroneous decision. This study extends and applies new measures of portfolio performance of the mutual funds, which are primarily based on the characteristics of the equity stocks (book-to-market, price to earnings, market capitalization, dividend yield, and momentum). The technique of style analysis specifically, is the portfoliobased style analysis of the open-ended equity mutual funds of Pakistan. The data has been taken from the Mutual Fund Association of Pakistan from 2010 to 2014. The findings relate to adding a new factor of price to earnings in a model, so the net effect is tested from multivariate regression analysis. All the portfolios are found to be negative and significant for the price to earnings. It is appropriate by making portfolios regarding style analysis of equity mutual funds in Pakistan. Decision-makers of the mutual funds should carefully account for all the factors, to benefit from the returns of the funds regarding investing, financing and valuation decision.

COMPARISON OF THE PERFORMANCE OF SHARIA STOCK MUTUAL FUNDS WITH THE TREYNOR, SHARPE, AND JENSEN METHODS DURING THE RECESSION IN INDONESIA

During the economic recession, mutual funds can be used as an investment method to help fund circulation and revive the economy of country which has been affected by the Covid-19 pandemic. Investors can find out the mutual fund performance by measuring the risk adjusted return in order that investment can be maximized. The aim of this research is to compare the performance of sharia equity mutual funds and foreign securities based equity mutual funds during economic recession in January 2019 to October 2020 which divided into two periods, before the covid-19 pandemic from January 2019 to February 2020 and after the covid-19 pandemic from March to October 2020. The measurement of mutual fund portfolio performance uses the Treynor, Sharpe, and Jensen methods. They are based on purposive sampling which results the samples of 32 (thirty two) mutual funds from 25 (twenty five) investment managements. The results of the performance comparison show that Cipta Saham Unggulan Syariah which belongs to PT Ciptadana Asset Management provides the best return among its competitors where this mutual fund is able to exceed the benchmark before recession -0,0124 and after recession -0,0046 using the three methods.

Mutual funds behavior and risk-adjusted performance in Nigeria

The paper investigates the behavior of mutual funds and their risk-adjusted performance in the financial markets of Nigeria between April 2016 and May 31, 2019, using descriptive statistics, as well as CAPM, Jensen’s alpha, and other risk-adjusted portfolio performance measures such as Sharpe and Treynor ratios, as well as Fama decomposition of return. The descriptive tests revealed that 80.77% of the funds were superior to market returns, while 13.46% were riskier. The market and the fund returns behaved abnormally with asymptotic and leptokurtic characteristics as their skewness and kurtosis varied from the normal requirements. Diagnostically, the normality test by Jacque-Berra showed that the return was not normally distributed at a 1% significance level. The market was more aggressive relative to the funds. The average risk-free rate was 6.75% above the market’s return. The risk-adjusted portfolio returns measured by Sharpe and Treynor ratios showed that 67.31% of the funds underperformed the market compared to 40.38% that outperformed the market using Jensen’s alpha. Fama decomposition of return revealed that the fund managers are risk-averse with 48% superior selection ability and rationally invested over 85% of investors’ funds in schemes with fixed income securities at a given risk-free return that cushioned the negative effects of the systematic and idiosyncratic risks and consequently threw the total returns into positive territories. Overall, the fund managers possessed 52% of inferior selection abilities that only earned 33% of superior risk-adjusted returns and hence, failed to achieve the desired diversification in the relevant period.

Portfolio Risk ‐ Beyond Volatility

Currently applied portfolio performance measures relate the portfolio return to the risk factor volatility or the risk factor correlation. In this study, Gunter Meissner, Ranjan Bhaduri, Lenny Linsky, and Eleanor Yuan quantify additional risks, which are relevant for assessing a manager's risk-adjusted return (i.e., credit risk, liquidity risk, and correlation risk).

Comparing Pure Stock Portfolio with Stock and Crypto-currency mixed Portfolio through LSTM to Compare & Analyze Investment Opportunities for Portfolio Performance Measurement

LSTM (Long Short-Term Memory) has revolutionized the approach to time series prediction many folds due to its appropriate capability to forecast through Non-Linear forecasting methods. It’s observed that RNN has the capability to similarly think through given enough training in accordance to desired functionality models. Due to the Gated Structure referring to storing relevant information and forgetting the irrelevant information’s LSTM made revolutionary accomplishments towards non-linear forecasting that is dependent on human-like behavior. In this research, we have focused on making a comparison between two different portfolio’s which will depend upon LSTM’s future forecasting capability in terms of predicting the best possible output which gets illustrated through Portfolio Optimization principles