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Analysing the effect of portfolio concentration index and stock market correlation

The objective of this research was to test the effect of portfolio concentration on market correlation. The relationship between stock market linkages and portfolio concentration was investigated to gain a better understanding of the vulnerability that a country is subjected to during a global finan...

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Main Authors: Lee, Pei Ling, Lee, Chin, Siong, Hook Law, Wan Ngah, Wan Azman Saini
Format: Article
Language:English
Published: Penerbit Universiti Kebangsaan Malaysia 2019
Online Access:http://psasir.upm.edu.my/id/eprint/80630/1/PORTFOLIO.pdf
http://psasir.upm.edu.my/id/eprint/80630/
http://www.ukm.my/fep/jem/pdf/2019-53(2)/jeko_53(2)-12.pdf
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spelling my.upm.eprints.806302020-11-04T13:05:06Z http://psasir.upm.edu.my/id/eprint/80630/ Analysing the effect of portfolio concentration index and stock market correlation Lee, Pei Ling Lee, Chin Siong, Hook Law Wan Ngah, Wan Azman Saini The objective of this research was to test the effect of portfolio concentration on market correlation. The relationship between stock market linkages and portfolio concentration was investigated to gain a better understanding of the vulnerability that a country is subjected to during a global financial crisis. The portfolio concentration index of a country reflects its portfolio investment strategy and design, whether it prefers to concentrate its portfolio of stocks in a handful of target markets or to geographically diversify its investments. It was found that countries that had invested disproportionate weights in selected financial markets were significantly different from those countries that held less concentrated portfolios in terms of their effect on financial market integration. The portfolio concentration index, real interest rate differential, industrial production growth differential, and stock market size differential were statistically significant in influencing the correlation in stock returns when a fixed effects model was employed for a sample of 25 investing and 27 investee countries from 2001 to 2014. This study implied that although portfolio allocation affects financial market integration, it is not significantly related to financial spill-overs during crisis periods. The findings may shed light for investors regarding portfolio designs and allocation decisions. Penerbit Universiti Kebangsaan Malaysia 2019 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/80630/1/PORTFOLIO.pdf Lee, Pei Ling and Lee, Chin and Siong, Hook Law and Wan Ngah, Wan Azman Saini (2019) Analysing the effect of portfolio concentration index and stock market correlation. Jurnal Ekonomi Malaysia, 53 (2). pp. 165-176. ISSN 0127-1962 http://www.ukm.my/fep/jem/pdf/2019-53(2)/jeko_53(2)-12.pdf 10.17576/JEM-2019-5302-12
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description The objective of this research was to test the effect of portfolio concentration on market correlation. The relationship between stock market linkages and portfolio concentration was investigated to gain a better understanding of the vulnerability that a country is subjected to during a global financial crisis. The portfolio concentration index of a country reflects its portfolio investment strategy and design, whether it prefers to concentrate its portfolio of stocks in a handful of target markets or to geographically diversify its investments. It was found that countries that had invested disproportionate weights in selected financial markets were significantly different from those countries that held less concentrated portfolios in terms of their effect on financial market integration. The portfolio concentration index, real interest rate differential, industrial production growth differential, and stock market size differential were statistically significant in influencing the correlation in stock returns when a fixed effects model was employed for a sample of 25 investing and 27 investee countries from 2001 to 2014. This study implied that although portfolio allocation affects financial market integration, it is not significantly related to financial spill-overs during crisis periods. The findings may shed light for investors regarding portfolio designs and allocation decisions.
format Article
author Lee, Pei Ling
Lee, Chin
Siong, Hook Law
Wan Ngah, Wan Azman Saini
spellingShingle Lee, Pei Ling
Lee, Chin
Siong, Hook Law
Wan Ngah, Wan Azman Saini
Analysing the effect of portfolio concentration index and stock market correlation
author_facet Lee, Pei Ling
Lee, Chin
Siong, Hook Law
Wan Ngah, Wan Azman Saini
author_sort Lee, Pei Ling
title Analysing the effect of portfolio concentration index and stock market correlation
title_short Analysing the effect of portfolio concentration index and stock market correlation
title_full Analysing the effect of portfolio concentration index and stock market correlation
title_fullStr Analysing the effect of portfolio concentration index and stock market correlation
title_full_unstemmed Analysing the effect of portfolio concentration index and stock market correlation
title_sort analysing the effect of portfolio concentration index and stock market correlation
publisher Penerbit Universiti Kebangsaan Malaysia
publishDate 2019
url http://psasir.upm.edu.my/id/eprint/80630/1/PORTFOLIO.pdf
http://psasir.upm.edu.my/id/eprint/80630/
http://www.ukm.my/fep/jem/pdf/2019-53(2)/jeko_53(2)-12.pdf
_version_ 1683232234599874560
score 13.211869

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