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Abstract
This study attempts to evaluate Malaysia’s stock performance before and during COVID-19 across all sectors by using the Sharpe ratio and Sortino ratio with risk measured by standard deviation. We develop an algorithm for stock selection to construct the portfolio investment. In our study, we apply the Sharpe ratio, Treynor ratio and Jensen’s alpha to identify the optimal portfolio. The result shows that the portfolio with stock selection based on the Top 20 Sortino ratio from all stocks is superior to stock selection based on the Top 3 Sortino ratio for each sector. The daily adjusted closing stock prices are collected from March 1, 2019 to December 31, 2021. The result of this study indicates that several sectors are not affected during the COVID-19 pandemic, which are Technology, Industrial, Consumer Products and Services and Property. Hence, investors are suggested to form an optimal portfolio investment based on these sectors. Stock analysts are recommended to imply various risk-adjusted measures to evaluate the portfolio performance with a comprehensive perspective to support the outcome analysis.
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References
- R.A. Haugen, “Modern Investment Theory, 5th edition,” Upper Saddle River: Prentice-Hall, 2001.
- N. Amenc, F. Goltz, and A. Lioui, “Practitioner Portfolio Construction and Performance Measurement: Evidence from Europe,” Financial Analysts Journal 67(3), 39–50 (2011).
- D.M. Verma and M.J.R. Hirpara, “Performance Evaluation of Portfolio using the Sharpe, Jensen, and Treynor Methods,” Scholars Journal of Economics, Business and Management 3(7), 382–390 (2016).
- Z. Mao and Z. Gu, “Risk-Adjusted STOCK Performance,” International Journal of Hospitality & Tourism Administration 8(4), 77–98 (2007).
- P. Srivastava and S.S. Mazhar, “Comparative Analysis of Sharpe and Sortino Ratio with reference to Top Ten Banking and Finance Sector Mutual Funds,” International Journal of Management Studies 4(2), 93 (2018).
- F. Schmid and R. Schmidt, “Statistical Inference for Sharpe Ratio,” Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, 337–357 (2010).
- R. Robiyanto, “Performance Evaluation of Stock Price Indexes in the Indonesia Stock Exchange,” International Research Journal of Business Studies 10(3), 173–182 (2018).
- M. Nugroho, S.H. Moehaditoyo, and K. Anam, “The System of Investment Decision Making Through Analysis of Stock Portfolio Performance Based Single Index Model (Comparison Study of Shariah Stocks and Conventional Stocks),” Journal of Theoretical & Applied Information Technology 95(6), 1418-1431 (2017).
- P. Carl, B.G. Peterson, K. Boudt, and E. Zivot, “Econometric Tools for Performance and Risk Analysis,” R package, 2020.
- C.R. Bacon, “Practical Portfolio Performance Measurement and Attribution, 2nd edition,” John Wiley & Sons, 2008.
- T.N. Rollinger and S.T. Hoffman, “Sortino: A ‘Sharper’Ratio,” Chicago, Illinois: Red Rock Capital, 2013.
- D. Harding, “Critique of the Sharpe Ratio,” Wilton Capital Management, 2002.
- S. Altınırmak, Y. Gül, and B.O. Okoth, “Performance Evaluation of Mutual Funds Via Single Valued Neutrosophic Set (svns) Perspective: A Case Study in Turkey,” Infinite Study 23(10), 110-125 (2018).
- I. Nurhayati, E. Endri, R.S. Aminda, and L. Muniroh, “Impact of COVID-19 on Performance Evaluation Large Market Capitalization Stocks and Open Innovation,” Journal of Open Innovation: Technology, Market, and Complexity 7(1), 56 (2021).
References
R.A. Haugen, “Modern Investment Theory, 5th edition,” Upper Saddle River: Prentice-Hall, 2001.
N. Amenc, F. Goltz, and A. Lioui, “Practitioner Portfolio Construction and Performance Measurement: Evidence from Europe,” Financial Analysts Journal 67(3), 39–50 (2011).
D.M. Verma and M.J.R. Hirpara, “Performance Evaluation of Portfolio using the Sharpe, Jensen, and Treynor Methods,” Scholars Journal of Economics, Business and Management 3(7), 382–390 (2016).
Z. Mao and Z. Gu, “Risk-Adjusted STOCK Performance,” International Journal of Hospitality & Tourism Administration 8(4), 77–98 (2007).
P. Srivastava and S.S. Mazhar, “Comparative Analysis of Sharpe and Sortino Ratio with reference to Top Ten Banking and Finance Sector Mutual Funds,” International Journal of Management Studies 4(2), 93 (2018).
F. Schmid and R. Schmidt, “Statistical Inference for Sharpe Ratio,” Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, 337–357 (2010).
R. Robiyanto, “Performance Evaluation of Stock Price Indexes in the Indonesia Stock Exchange,” International Research Journal of Business Studies 10(3), 173–182 (2018).
M. Nugroho, S.H. Moehaditoyo, and K. Anam, “The System of Investment Decision Making Through Analysis of Stock Portfolio Performance Based Single Index Model (Comparison Study of Shariah Stocks and Conventional Stocks),” Journal of Theoretical & Applied Information Technology 95(6), 1418-1431 (2017).
P. Carl, B.G. Peterson, K. Boudt, and E. Zivot, “Econometric Tools for Performance and Risk Analysis,” R package, 2020.
C.R. Bacon, “Practical Portfolio Performance Measurement and Attribution, 2nd edition,” John Wiley & Sons, 2008.
T.N. Rollinger and S.T. Hoffman, “Sortino: A ‘Sharper’Ratio,” Chicago, Illinois: Red Rock Capital, 2013.
D. Harding, “Critique of the Sharpe Ratio,” Wilton Capital Management, 2002.
S. Altınırmak, Y. Gül, and B.O. Okoth, “Performance Evaluation of Mutual Funds Via Single Valued Neutrosophic Set (svns) Perspective: A Case Study in Turkey,” Infinite Study 23(10), 110-125 (2018).
I. Nurhayati, E. Endri, R.S. Aminda, and L. Muniroh, “Impact of COVID-19 on Performance Evaluation Large Market Capitalization Stocks and Open Innovation,” Journal of Open Innovation: Technology, Market, and Complexity 7(1), 56 (2021).