THE HISTORY OF MALAYSIA STOCK MARKET

The Bursa Malaysia Berhad is a floor of trading for stock market in Malaysia who is chief member of the planetary stock markets with history about 80 old ages. At here all the dealing related with stock and any others securities are traded. Malayan Stockbroker ‘s Association was introduced in twelvemonth 1937, but this association did non publically merchandise a portions. Company who are listed in Main Board on Bursa Malaysia Securities merely big and good known company while medium sized companies merely listed at Second Board. Besides that Bursa Malaysia besides separate their board for offshore companies while for hereafters and options contracts are traded on the Derivatives Exchange that operated by Bursa Derivatives. These capital markets are regulated by assorted Acts of the Apostless of parliament. The web of keeping companies besides develops and distributes comprehensive market information merchandises and services.

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Today, in Bursa Malaysia Securities Main Board there have many good known companies who are do dealing under several sectors like consumer merchandise, industrial merchandise, trading and services, plantation and others. All the stock counters are active twenty-four hours by twenty-four hours and their stock monetary value besides alteration every clip because of the demand for their stock from the investor.

1.1 BACKGROUND OF STUDY

This survey conducted to happen out the hazard adjusted return of certain investing portfolio by proving it with several portfolio measurings. All the equity stocks under Trading and Services will be tested by six types of ratio which is Sharpe ratio, Treynor ratio, Jensen ‘s Alpha, Information ratio, Adjusted Sharpe Ratio and besides Adjusted Jenson ‘s Alpha. Sharpe and Treynor indices are concentrating on the public presentation based on its premium return and the hazard factor of the portfolio itself. However, Jensen ‘s Alpha are concentrating more on the ability of the fund director to pull off the portfolios and doing the investing determination. When the alpha have a positive mark it were shown that the fund are holding a positive return and automatically convey the good investing determination. Sometimes Adjusted Jensen ‘s Alpha being used when alpha is zero because when the alpha is zero it means the index can non be used to compare the public presentation of different portfolios with different degree of systematic hazard. The zero mark of alpha show that the portfolios holding a just public presentation. The information ratio ( IR ) measures the ability of portfolio director to bring forth extra returns relative to a benchmark, but besides tried to place the consistence of the investor. After mensurating all the trading and services equity stocks public presentation of portfolio so the following stairss is go to the choice of stocks by utilizing a Simple Sharpe Portfolio Optimization for the measuring the plus allotment of equity.

Simple Sharpe Portfolio Optimization is the method that being used to place which stocks is included in the optimal portfolio and besides to demo how much that investor should put in each and every stock. To lend towards this field of survey this paper seek to look into which stock are included in the optimal portfolio where it is the stocks which have a lower value of cutoff point than peculiar C-value ( C* ) . The ( C* ) is determined by looking at the highest value of cutoff point. This technique besides can give a clear image to director what are the features of a security are desirable by mentioning the market motion. Throughout this paper we believe the being of risk-free assets and besides at least one security holding the purely greater of expected return than the return on the riskless plus. The consequence that can garner from this type of method are straightforward and were do investor can choose the best stock for their investing intent. Therefore, this method can decide a major trouble of the traditional attack in portfolio choice based upon historical information because of inability to foretell sudden alterations of monetary value inclinations. Introducing information about future behaviour of the stock monetary value may assist to do more appropriate picks and can salvage their timer.

1.2 PROBLEM STATEMENT

The public presentation of equity stocks monetary value presents is the dimension for the investor to do the determination for certain investing. The fluctuation of the stock monetary value were causes the investor to mind about the future thing that will happen. Refer about the public presentation of the stock monetary value presents were make an investor for doing a item research about the stocks market before they want to put in each of every stocks. The stock ‘s monetary values become worst when planetary fiscal crisis occurred. Because of this crisis, a speculator were do a difficult determination to theorize the market monetary value to cognize the public presentation of market index whether it can take to the bad perceptual experience on public presentation towards others market indexes. Through this research, this survey conducted to happen the public presentation of trading and services stock equity market whether the stock market is outperformed or underperformed the market. It is because these sectors were consequence more when crisis happen. In order to cognize the public presentation of the stocks, fiscal analyst must taking into consideration a universe planetary market and besides the systematic hazard that will happen in future.

1.3 RESEARCH Question

In this survey, there are several steps that can be used to measure the public presentation of portfolios research. To measure and choosing the best equity stock market the expected return and besides the hazard adjusted return should be calculate. Several inquiries have been developed to work out this job of survey. These research inquiries are:

Whether the public presentation of stocks of fund is outperform?

Which stocks are at the highest ranking or lowest ranking?

Which stocks are to be selected based on the public presentation of it?

1.4 OBJECTIVE OF STUDY

Several surveies have been done sing the choice of stocks and all of this survey have their ain mission what is precisely the survey is used and the aim of the survey. The aim for this survey is:

To find the public presentation of the stock whether is outperform or underperform.

To happen out which stock is at the highest and lowest ranking.

To place which stocks should be choice based on their public presentation.

1.5 SIGNIFICANT OF THE STUDY

1.5.1. To the investor.

Investing in stocks is a really profitable investing for investors because the investing is in conformity with the current market monetary value and it is non fixed at certain monetary value merely. The volatility of the market monetary value were makes the investing return go higher or frailty versa. Investors must fix to cover with any possible for the stock market because it does non needfully assure the investors ‘ net incomes. The investors should cipher both hazard and besides return that they should derive. Therefore by making this survey, it can assist the investors to analyse the market status and besides the public presentation of the stock before they enter into this kind of investing.

1.5.2. To the company.

This survey besides can be used as guidelines to the company when they want to do any investing determination. It is because these surveies are showed the computation of the expected return and besides hazard adjusted return of investing portfolio. When the company calculated both of this, so they were know which stock that can give higher return to them and which stocks that they should put with lower hazard.

1.5.3. To other research worker

This paper besides can be use as a mention to the other research worker when they want to do a research for stock choice. It is because this paper is sought to look into the public presentation of the stocks. To do a choice for investing purposed, they should cognize the public presentation and besides the method that should being used to cipher both side of hazard and return.

1.6 SCOPE OF STUDY

The range for this survey would cover the equity stocks monetary value under Trading and Services country that are listed in chief board of Bursa Malaysia. The period scope for the information is get downing from January 2005 until December 2010 and merely used a monthly information. Besides that for benchmark of this survey we merely use the information from FBMKLCI ( Future Trade Secondary Exchange of Bursa Malaysia Composite Index ) for looking the market index and besides a Treasury bill for the hazard free rate.

1.7 LIMITATION OF STUDY

Troubles to acquire an accurate informations are the restriction for this survey because of limited resources and besides confidentiality of the information. It is because the informations that being used for this survey is secondary informations and all the informations are from Bursa Malaysia and Bank Negara of Malaysia. To acquire all of this information we should travel to both topographic points to acquire an accurate informations because all of it is non stated in the web site. All the informations that should be gathered are from January 2005 until December 2010. However several companies are established after 2005. Therefore, the period scope does non fit with the specified standards and were do trouble when to happen the determination at the terminal.

1.8 DEFINITION OF TERMS

1.8.1 Stock.

Stock represents the capital raised by a company through the issue and subscription of portions entitling their holders to dividends, partial ownership, and normally voting rights.

1.8.2 Hazard.

Hazard represents a state of affairs affecting exposure to danger. It besides a factor, thing, component, or class affecting unsure danger a jeopardy

1.8.3 Return.

Return represents a net income or output, as from labour or investings.

1.8.4 Portfolio.

Portfolio represents a set of securities that keeping more than one security at a clip where it can assist to distribute hazard over many securities.

1.8.5 Performance.

Performance will be stand foring as the entire return on an investing over a period of clip. It besides a subjective step of how an investing or the market by and large is making over a period of clip.

1.8.6 Trading and services.

Trading and services will be showing as a company or bureau that performs a public service that capable to authorities ordinance and besides do a dealing for purchasing or selling securities or trade goods for their company.

1.9 Summary

This survey is sought to look into the stock choice by looking at the public presentation of each stock. The higher stock monetary value that the company was issued can non assure a higher return to their investor. It is because the stock monetary values ever fluctuate based on the economic status. To cognize which stocks that can give lower hazard to the investor, it can be step utilizing several methods. The investor should follow the motion of market monetary value to do a right investing determination.

Chapter 2

LITERATURE REVIEW

Introduction

Investors must do a item research before they want to take the best stocks that were give them a good return instead than confronting a higher hazard. To do a good research, the investor should take consideration for all possibilities that were occurred at that clip the investing procedure or stocks being traded. Investors should cipher both side of hazard either systematic or unsystematic to avoid them confronting troubled at the terminal. The investor besides should to do a item research by looking at old survey that have been done and do decision from that. All the bookman sentiments besides should been studied and take positive action from what have you learned.

PREVIOUS STUDY

A big figure of surveies have been done to see the public presentation of stocks market and besides about the choice of stocks. Zakamouline ( 2009 ) conducted an empirical survey about the investing opportunities set. It showed that the investing chance set can instead be characterized in footings of the vector of Sharpe ratios of single hazardous assets and the correlativity matrix. Using the Sharpe ratio, it besides reconsidered the CAPM relationship and adjusted the Jensen ‘s alpha in order to mensurate unnatural portfolio return.

Hung Chen ( 2008 ) explained on his paper about the stock choice by utilizing informations enclosure analysis ( DEA ) . This technique created the superior return and significantly outperformed the industry norm. The consequence shown by utilizing Sharpe ratios of the portfolios for CCR and BCC is 0.36 and 0.34 severally and both of them outperformed the portfolios of industry, which is merely 0.25. In add-on, the Sharpe ratio of the portfolios constructed by the little companies was merely 0.18. This consequence revealed that the portfolios constructed utilizing DEA generated higher hazard adjusted returns than those of the industry, and portfolios of little houses.

Pinging Lim ( 2008 ) gives account about the Sectoral efficiency of the Malayan stock market and the impact of the Asiatic fiscal crisis. He used turn overing bicorrelation trial atmospherics to observe nonlinear predictability stock return series. The most efficient sector when confronting fiscal crisis is tin and excavation which holding 8.8 % important H windows trial while trading and services at the fifth rank which ( 11.62 % ) important trial. These consequences indicate that trading and services is the sector that contributes to economic growing, and when this crisis occurred it caused few affected to the equity stock market and the stock listed under this sector holding lower return. Therefore, the Numberss of investor besides go lower because of the hazardous stocks.

C.Pat Obi ( 2007 ) on his survey use the Sharpe public presentation index ( SPI ) to mensurate the portfolio public presentation on his survey because this method as an appropriate measuring to cipher the entire hazard on each stock. At his survey merely airlines sector and besides fiscal sector have a positive SPI which is 0.3541 and 0.1326 compared with energy sector which is -0.0336. Even though superior public presentation index will accomplish when SPI above 1 but this two types of stock can be classified as good stocks because have a positive value for the SPI.

Fazilah, Roselee and Guat Ha ( 2007 ) revealed that the stableness of paying dividend were non demo the stock holding a good return and the stock is outperformed the market it is because of several factor contributing of the fluctuation such as systematic hazard that we can non command.

G. Marikas ( 2005 ) on their survey used the information ratio in order to measure managerial public presentation of each of the seven manner investings. This method seeks to sum up in a individual figure the mean, which states that the mean and standard divergence are equal statistics for qualifying an investing portfolio. Consequence showed the domestic and foreign stocks directors transcending 0.5 but less than 1, explained by the lessening in these portions due to the hapless public presentation of the Grecian stock.

Scholz and Wilkens ( 2005 ) measured the investor portfolio investing by looking at the house size, the Sharpe step are used when considered the entire hazard and this technique are designated for a big part of the overall portfolio. While public presentation steps based on systematic hazard should used Treynor step because it evaluated the investing that represents a little part of the overall portfolio.

Matthias ( 2005 ) said the Private Equity ( PE ) outperformed the investing benchmark one time their holding positive expected return ( ER ) . However for Public Equity Market instances ( PME ) when the PME is lower than one it mean the market is underperformed.

Summary

There are some relevant surveies for choice schemes of stock that can used as a guideline to this survey. The commissariats and ordinances in fixing the prospectus vary from other factors. This survey examines the Trading and Services Stock in Malaysia chief board listed companies ‘ prospectus and besides would wish to see whether there are any similarities on the stock choice schemes. The determination that can be generated would give clear image which one stock will be included under optimal portfolio by utilizing this method.

Chapter 3

METHODOLOGY AND DATA

3.0 Introduction

The aim of this survey is to cognize which stock is outperformed the market and which stocks are being selected based on their public presentation. Methodology adopted for this survey is utilizing Simple Sharpe Portfolio Optimization technique where by utilizing this technique investor can cognize which stocks holding a good public presentation and besides cognize how much that they should put on it. Ordinary Leased Square ( OLS ) method is used to minimise the amount of squared perpendicular distances between the ascertained responses in the dataset. Purpose for utilizing these OLS is to gauge the unknown parametric quantity at the additive arrested development line. The information will be run by utilizing Microsoft excel to cognize the return and besides the public presentation for this trial. All the stocks will be test by several trial measuring of portfolio investing to cognize the expected return and besides to cipher how much the hazard of the stock. This survey determined the important factors that influenced the schemes of stocks choice where which one of stocks that have a good return and besides included under optimal portfolio. The cutoff point for this types of equity stocks besides should been calculated because from the cutoff point the investor can cognize the ( C* ) where from this, the stocks that below ( C* ) are automatically non being listed because we merely necessitate the stock that over the benchmark. Therefore by making this research investor can precisely gets the true consequences for their stocks instead than do premise based on their ain political orientation.

3.1 DATA COLLECTION

The informations that can be used for this survey are utilizing secondary informations which is the stock monetary value of trading and services equity stock that are listed in Main Board of Bursa Malaysia. The period scope for the information is get downing from January 2005 until December 2010 and merely used a monthly informations. We besides use the information from FBMKLCI ( Future Trade Secondary Exchange of Bursa Malaysia Composite Index ) for looking the market return and besides a Treasury bill for the hazard free rate as a benchmark for this survey.

3.2 Sampling Frame

To procure an acceptable consequence, this survey decided to utilize 179 samples companies under Trading and Servicess Stocks that are listed on the Main Board of Bursa Malaysia. The historical monetary values of stocks are collected from 2005 until 2010. FBMKLCI ( Future Trade Secondary Exchange of Bursa Malaysia Composite Index ) informations besides required for ciphering the market return as a benchmark for this survey and besides the T-Bill to cognize the hazard free rate of the portfolios.

3.3 Beginnings OF DATA

The information that being used for this research are cod from secondary beginnings where we used the historical monetary value of stocks under Trading and Services and we get all the information from Bursa Malaysia. The T-bills information we get from Bank Negara of Malaysia while for FBMKLCI ( Future Trade Secondary Exchange of Bursa Malaysia Composite Index ) information we get from Bursa Malaysia. All the informations are utilizing monthly informations and get downing from January 2005 until December 2010.

3.4 RESEARCH DESIGN

This research is designed to research the public presentation of certain stock by mensurating it with certain trial and after that go to the stock choice based on the public presentation of the stocks.

3.4.1 Purpose of the Study

The intent of this survey is want to cognize the public presentation of stock under trading and services in Malaysia market by mensurating it with several portfolio measurings and after that go to the choice of the stock based on the public presentation of the stocks. Merely stock that has higher extra return will be selected.

3.4.2 Types of Probe

In order to find the public presentation of the stocks, we should cipher the hazard adjusted return of it. All of it should be steps by several types of ratio. The stock public presentations are being trial utilizing Sharpe ratio, Jensen ‘s alpha, Treynor ratio, Information ratio, Adjusted Sharpe ratio and besides Adjusted Jensen ‘s alpha. Then, stocks that have a good public presentation will be selected because we want to place which stocks are included in the optimal portfolio by utilizing simple Sharpe portfolio optimisation and besides to cognize how much that investor should put in each and every stock that they choose.

3.4.3 Unit of Analysis

In this survey, the historical monetary value of 179 companies listed under trading and services stocks in Malaysia are being used.

3.4.4 Time Horizon

This survey is utilizing monthly footing informations of equity stock under Trading and Services in Main Board of Bursa Malaysia get downing January 2005 until December 2010.

THEORETICAL FRAMEWORK

STOCK SELECTION

Treynor

Sharpe

Trial Performance

Jensen ‘s alpha

Equity trading and service stocks

Information ratio

Adjusted Sharpe

Adjusted Jensen ‘s alpha

Figure 1: Conventional Diagram ( Relationship Diagram )

Harmonizing to the diagram above, it can be elaborated that the public presentation of the stocks can be measured by these types of method for doing investing determination.

DATA ANALYSIS AND TREATMENT

The stock will be test by six types of portfolio measuring which is Sharpe ratio, Treynor ratio, Jensen ‘s alpha, Information ratio, Adjusted Sharpe ratio and besides Adjusted Jensen ‘s alpha. All this are used to find the hazard adjusted return of the investing portfolios.

3.6.1 The Sharpe ratio is used to mensurate the extra return of portfolio to its entire investing hazard. It is defined as:

SI = rp – rfr

I?p

Where SI is a Sharpe index, rp is the mean return on portfolio, rfr is the hazard free rate and I?p is the standard divergence of the return of the portfolio.

3.6.2 The Treynor ratio is used to mensurate the extra return of a portfolio to its entire systematic hazard faced by the portfolio in its investing. It is defines as:

TI = rp – rfr

I?p

Where TI is Treynor index, rp is the mean return on portfolio, rfr is the hazard free rate and I?p is the coefficient of portfolio.

3.6.3 Jensen ‘s alpha is used to cognize the fund director ability in doing investing determination. A positive mark of alpha showed the financess have a positive return and it is a mark of good investing determination. It is defined as:

I±p = rp- rfr + I?p ( rm – rfr )

Where rp is the return on the portfolio being evaluated at clip T, rfr is the hazard free rate in period T, rm is the return on the market, I?p is the sensitiveness of the portfolio to the market and I±p is the Jensen ‘s public presentation measuring.

3.6.4 Information ratio is used to step of hazard adjusted return of fiscal security of plus. It ‘s clearly defined as expected active return divided by tracking mistake ( standard divergence of the active return ) .

IR = E ( R – Rubidium ) = I± = E ( R – Rubidium )

I? W a?svar ( R- Rb )

Where R is the portfolio return, Rb is the benchmark return, I± = E [ R a?’ Rb ] is the expected value of the active return, and I‰ = I? is the standard divergence of the active return, which is an alternate definition of the tracking mistake.

3.6.5 Adjusted Sharpe ratio is used to extinguish the prejudice sing a standard divergence and besides the figure of observation. It is defines as:

ASE© = SE© x no.of observations

No. of observation + 0.75

Where SE© is a Sharpe index and the figure of observation are utilizing the period of month that we used for this survey which is 72 months

3.6.6 Adjusted Jensen ‘s Alpha ratio is used to comparing the public presentation of different portfolio with different degree of systematic hazards and besides used when the alpha is equal to nothing. The expression is:

Adjusted Jensen ‘s alpha = I±I?

I?I?

Where I±I? is a Jensen ‘s alpha index and I?I? is represent as a beta of the portfolios

3.6.7 After all the stock are being tested utilizing this method of public presentation trial, so the stock holding a return above the benchmark will be selected to following choice utilizing Simple Sharpe Portfolio Optimization. This technique has simplified the building of an optimal portfolio and to cognize which stocks are included in optimal portfolio where it consists of stocks which have value of cutoff point lower than ( C* ) . The ( C* ) is determined by looking at the highest cutoff point. This technique besides can give you an thought about how much that you should put in each and every stock.

r-rf

I?

( Equation 1: extra return to beta ratio )

Where ;

R = rate of return of security

releasing factor = hazard free rate of return

= beta of security

I?A?ma?‘ ( r-rf ) I?

I?A? Internet Explorer

C =

1 + I?A?m a?‘ I?A?

I?A? Internet Explorer

( Equation 2: expression of C-value )

Where:

C = C value of security

I?A? Internet Explorer = residuary discrepancy of security I

I?A?m = discrepancy of market

Wisconsin = omega I

a?‘ zi

( Equation 3: expression of weighted )

Where:

zi = I?i / I?A? Internet Explorer ( ri- releasing factor ) / I?i – C*

3.7 Summary

In the nutshell, this chapter will supply the research design that will be used to mensurate the portfolio public presentation. The survey aims to find which stocks that holding a good surplus return and besides want to find the hazard adjusted return of the investing portfolio. From this research the investor can do their investing determination based on the return and besides the hazard. Besides that, it besides can demo how much hazard that they should confronting if they want to put in certain equity stocks market. The market monetary value of stock ever fluctuates because it followed the economic status. This research will be done in conformity to the aim where to find the public presentation of the stock whether is outperform or underperform. This information will possibly can be used by the investor for their schemes for doing an accurate choice of stocks particularly on trading and services country. Since this survey focal point on the information from 2005 until 2010, it would give a better image on the motion of the historical trading and services current monetary value.

Chapter 4

Analysis AND Determination

4.0 Introduction

This chapter provides a determination on the public presentation of the equity stock market under Trading and Services country. The samples for this survey are coming from 179 companies listed at the Main Board of Bursa Malaysia. Stocks being take for farther analysis merely the stock that have R-square above the benchmark which is ( 0.35 ) . Therefore for this analysis merely eight companies are in this class ( above 0.35 ) . In this chapter, consequences for the public presentation trial are provided.

4.1 PORTFOLIO MEASUREMENT Trial

In order to find the hazard adjusted returns and besides to do a comparing within peculiar hazard category of the investing portfolio, all the stocks will be measured by utilizing six types of public presentation trial. The stocks have been ranked on the footing of Sharpe Ratio, Treynor Ratio, Jensen ‘s Alpha Ratio, Information Ration, Adjusted Jensen ‘s Alpha Ratio and Adjusted Sharpe Ratio. Below are the diagrams for the consequence analysis.

Table 1:

Ranking of Sample Trading and Services Stock on footing of Sharpe Ratio

Rank

Stock

Sharpe Ratio

A

A

A

1

MALAYSIA AIRPORT HOLDING BHD

16.94 %

2

DIALOG GROUP BHD

13.59 %

3

SAPURACREST PETROLEUM BHD

11.84 %

4

MULTI-PURPOSE HOLDING BHD

7.71 %

5

SURIA CAPITAL HOLDING BHD

6.09 %

6

MEDIA PRIMA BHD

2.77 %

7

TRADEWINDS CORPORATION BHD

2.53 %

8

SIME DARBY BHD

-1.86 %

Table 2:

Ranking of Sample Trading and Services Stock on footing of Treynor Ratio

Rank

Stock

Treynor Ratio

A

A

A

1

SURIA CAPITAL HOLDING BHD

4.00 %

2

MALAYSIA AIRPORT HOLDING BHD

1.24 %

3

DIALOG GROUP BHD

0.86 %

4

SAPURACREST PETROLEUM BHD

0.83 %

5

MULTI-PURPOSE HOLDING BHD

0.51 %

6

TRADEWINDS CORPORATION BHD

0.18 %

7

MEDIA PRIMA BHD

0.16 %

8

SIME DARBY BHD

-0.11 %

Table 3:

Ranking of Sample Trading and Services Stock on footing of Jensen ‘s Alpha Ratio

Rank

Stockss

Jensen ‘s Alpha

A

A

A

1

SAPURACREST PETROLEUM BHD

1.82 %

2

DIALOG GROUP BHD

1.53 %

3

MALAYSIA AIRPORT HOLDING BHD

1.40 %

4

MULTI-PURPOSE HOLDING BHD

0.89 %

5

SURIA CAPITAL HOLDING BHD

0.85 %

6

TRADEWINDS CORPORATION BHD

0.32 %

7

MEDIA PRIMA BHD

0.26 %

8

SIME DARBY BHD

-0.14 %

Table 4:

Ranking of Sample Trading and Services Stock on footing of Information Ratio

Rank

Stock

Information Ratio

A

A

A

1

SIME DARBY BHD

1355.60 %

2

MALAYSIA AIRPORT HOLDING BHD

1175.10 %

3

MEDIA PRIMA BHD

901.88 %

4

DIALOG GROUP BHD

858.96 %

5

TRADEWINDS CORPORATION BHD

827.04 %

6

MULTI-PURPOSE HOLDING BHD

815.43 %

7

TRADEWINDS CORPORATION BHD

717.94 %

8

SAPURACREST PETROLEUM BHD

633.23 %

Table 5:

Ranking of Sample Trading and Services Stock on footing of Adjusted Sharpe Ratio

Rank

Stock

Adjusted Sharpe Ratio

A

A

A

1

MALAYSIA AIRPORT HOLDING BHD

0.17 %

2

DIALOG GROUP BHD

0.13 %

3

SAPURACREST PETROLEUM BHD

0.12 %

4

MULTI-PURPOSE HOLDING BHD

0.01 %

5

SURIA CAPITAL HOLDING BHD

0.06 %

6

MEDIA PRIMA BHD

0.03 %

7

TRADEWINDS CORPORATION BHD

0.03 %

8

SIME DARBY BHD

-0.02 %

Table 6:

Ranking of Sample Trading and Services Stock on footing of Adjusted Jensen ‘s Alpha Ratio

Rank

Stock

Adjusted Jensen ‘s Alpha

Ratio

A

A

A

1

MALAYSIA AIRPORT HOLDING BHD

1.23 %

2

DIALOG GROUP BHD

0.85 %

3

SAPURACREST PETROLEUM BHD

0.82 %

4

MULTI-PURPOSE HOLDING BHD

0.50 %

5

SURIA CAPITAL HOLDING BHD

0.39 %

6

MEDIA PRIMA BHD

0.17 %

7

TRADEWINDS CORPORATION BHD

0.15 %

8

SIME DARBY BHD

-0.12 %

All the ratio above have their ain restrictions. The Sharpe Ratio and Treynor Ratio have a similar measuring where both of it want to mensurate the hazard of the stock but the difference between it is the Sharpe Ratio want to mensurate the extra return with entire investing hazard while for Treynor Ratio want to mensurate merely the systematic hazard. However for investor to do a good investing determination, they should see their Jensen ‘s alpha measuring because when alpha have positive ( + ) sign its average the stocks holding positive return and frailty versa. However, Information ratio measurings are used when the investors want to do a comparing of public presentation stocks to its benchmark.

Referred to the Jensen ‘s alpha portfolio measuring, when alpha is ( + ) its mean the stock holding outperformed the expected public presentation but for the instance of alpha equal to 0 ( =0 ) the just public presentation can be seen. Therefore, in this instance to compare the public presentation of different stocks with different degree of systematic hazard the Adjusted Jensen ‘s Alpha measuring must be usage to decide this job. Zakamouline ( 2009 ) noted that Adjusted Jensen ‘s Alpha and Sharpe Ratio is a method to mensurate unnatural portfolio return. To extinguish a unfairness created by Sharpe Ratio in their public presentation trial, Adjusted Sharpe measuring should be usage to extinguish this job because the Sharpe Ratio normally are use a standard divergence and little figure of observation on their pattern.

Table 7 below contains a item about the parametric quantities of portfolio stocks from the eight companies.

Table 7:

Parameters Of Trading And Services Portfolio Stocks

Stock

Mean

Beta

Alpha

Rfr

Stdev

A

A

A

A

A

A

MALAYSIA AIRPORT HOLDING BHD

0.0222

1.1424

0.0214

0.0080

0.0834

DIALOG GROUP BHD

0.0235

1.7983

0.0090

0.0080

0.1140

SAPURACREST PETROLEUM BHD

0.0265

2.2204

0.0085

0.0080

0.1559

MULTI-PURPOSE HOLDING BHD

0.0171

1.7636

0.0028

0.0080

0.1177

SURIA CAPITAL HOLDING BHD

0.0167

2.1545

-0.0007

0.0080

0.1431

MEDIA PRIMA BHD

0.0108

1.5584

-0.0018

0.0080

0.1014

TRADEWINDS CORPORATION BHD

0.0114

-0.0055

-0.0055

0.0080

0.1348

SIME DARBY BHD

0.0067

1.1711

-0.0027

0.0080

0.0673

Form the public presentation trial analysis above, we can reason that merely six companies have a good public presentation based on their ranking for each public presentation trial. As a consequence, for this technique merely stock with the highest rank from above public presentation trial is being chosen for the following analysis. Table 8 below contain the inside informations of the observation for Simple Sharpe Portfolio Optimization where which stocks are included in the optimal portfolio and besides looking the value of cutoff point ( C* ) .

Table 8:

Simple Sharpe Portfolio Optimization Technique

Rank

Security

Excess return

A

to beta ratio

1

MALAYSIA AIRPORT HOLDING BHD

0.0124

2

SAPURACREST PETROLEUM BHD

0.0083

3

DIALOG GROUP BHD

0.0086

4

MEDIA PRIMA BHD

0.0018

5

SURIA CAPITAL HOLDING BHD

0.0040

6

SIME DARBY BHD

-0.0011

After Rank

Rank

Security

C-value

A

A

1

MALAYSIA AIRPORT HOLDING BHD

0.0032

2

DIALOG GROUP BHD

0.0046

3

SAPURACREST PETROLEUM BHD

0.0053

4

SURIA CAPITAL HOLDING BHD

0.0051

5

MEDIA PRIMA BHD

0.0046

6

SIME DARBY BHD

0.0037

To be included under portfolio

Rank

Security

Zi

Badger state

%

A

A

A

A

A

A

A

A

1

MALAYSIA AIRPORT HOLDING BHD

1.1604

0.6114

61.1384

2

DIALOG GROUP BHD

0.4621

0.2434

24.3447

3

SAPURACREST PETROLEUM BHD

0.2755

0.1452

14.5169

A

A

A

A

A

1.8981

1.0000

100

In the nutshell, from 179 samples merely these three companies have a good public presentation based on portfolio measuring trial. The remainder of the stocks are below the market benchmark and its mean the stock public presentation are underperform the market. The stocks cutoff point for this analysis is ( C* = 0.0053 ) . Stockss for MALAYSIA AIRPORT HOLDING BHD, DIALOG GROUP BHD, and SAPURACREST PETROLEUM BHD ( ranking 1-3 ) are the greater than C* , while stocks SURIA CAPITAL HOLDING BHD, MEDIA PRIMA BHD and SIME DARBY BHD ( ranking 4-6 ) are less than C* . Hence, an optimum portfolio consists of stocks that ranking from 1 until 3.

Most companies have beta mean = 2.6913 for the twelvemonth 2005 – 2010. This indicates most of the securities are more volatile than market portfolio. While norm of ( – ) alpha indicate that the portfolio has underperformed the market that is has lagged behind the market. The public presentation of three stocks above are outperformed the market based on the ( + ) mark of alpha and it was proved by the Simple Sharpe Optimization Method where this stocks will give investors the maximal return for the degree of hazard that they wish to accept ( stocks included in the optimal portfolio ) .

Chapter 5

CONCLUSION & A ; RECOMMENDATION

5.1 Decision

Most surveies within finance literature used their ain ways to cognize the public presentation of the stocks and merely few of them used the Simple Sharpe Portfolio Optimization Method. To do a choice for the stock that promised a higher return is hard but by utilizing this method the investors can easy cognize which one of the stock will give them the maximal return for the sum of hazard that they wish to accept. These analysis shown that the Trading and Services Stocks can be categorized as riskier stocks because of merely eight stocks are above the market benchmark. Its mean this classs of stock are stock that were affected more when fiscal crisis happen. Therefore to do a choice which stock are outperformed the market, the investors should take into consideration all the fiscal hazard that occurs at that clip. Because of the aim for this survey is to cognize the public presentation of this class of stock, the consequence for this nonsubjective shown that out of 179 stocks merely eight stocks outperformed the market and out of eight stocks merely three from its outperformed market benchmark. Stockss that ever at the highest rank came from MALAYSIA AIRPORT HOLDING BHD, DIALOG GROUP BHD and SAPURACREST PETROLEUM BHD. These three stocks have a good public presentation because of ever at the highest rank within portfolio measurement trial.

In the nutshell, this analysis provide the easiest manner to the investors before they want to do an investing determination because of the stocks will be test by utilizing 6 types of portfolio measuring. Besides that both of trial will shown approximately how much the return and besides risk that they should confronting and besides how much that they should put in each and every stocks that they more interested. This is one of the schemes that give clear image for the investors to do a right determination for investing purposed.

5.2 Recommendation

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