Equity portfolio optimisation in South Africa under varying market conditions
Date
2012-12-03
Authors
Loloee-Eshraghi, Maryam
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Abstract
Investors always try to protect their investments under different market conditions
(Schinasi and Smith 2000) by finding trends and predicting the future of the
market. Investors use different investment strategies. Value and growth strategies
are among these popular investment strategies. Some investors such as Bauman,
Conover and Miller (1998) believe in superior performance of value over growth
strategies.
The purpose of this research is to develop a financial model that identifies the
optimal equity portfolio in South Africa, which yields positive and significant
abnormal return for investors during bull and bear market conditions. The Black
and Litterman optimisation approach is implemented on the JSE All share index
(J203) to form optimum value and growth equity portfolios on a 10-year period,
starting from January 2000 to December 2010.
The findings show that between the optimum value and growth portfolio formed
based on the Black-Litterman optimisation model, the value portfolio outperforms
the growth portfolio in different market conditions. However, statistical tests do not
show a significance difference between the performances of these portfolios.
Description
MBA thesis - WBS
Keywords
Equities, Portfolio optimisation