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, Law, Siong Hook, W.N.W. Azman-Saini
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 2019
Online Access:	http://journalarticle.ukm.my/14126/ http://journalarticle.ukm.my/14126/ http://journalarticle.ukm.my/14126/1/jeko_53%282%29-12.pdf

id	ukm-14126
recordtype	eprints
spelling	ukm-141262020-02-06T13:41:56Z http://journalarticle.ukm.my/14126/ Analysing the effect of portfolio concentration index and stock market correlation Lee, Pei-Ling Lee, Chin Law, Siong Hook W.N.W. 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 application/pdf en http://journalarticle.ukm.my/14126/1/jeko_53%282%29-12.pdf Lee, Pei-Ling and Lee, Chin and Law, Siong Hook and W.N.W. Azman-Saini, (2019) Analysing the effect of portfolio concentration index and stock market correlation. Jurnal Ekonomi Malaysia, 53 (2). pp. 1-12. ISSN 0127-1962 http://www.ukm.my/fep/jem/content/2019-2.html
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
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 Law, Siong Hook W.N.W. Azman-Saini,
spellingShingle	Lee, Pei-Ling Lee, Chin Law, Siong Hook W.N.W. Azman-Saini, Analysing the effect of portfolio concentration index and stock market correlation
author_facet	Lee, Pei-Ling Lee, Chin Law, Siong Hook W.N.W. 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://journalarticle.ukm.my/14126/ http://journalarticle.ukm.my/14126/ http://journalarticle.ukm.my/14126/1/jeko_53%282%29-12.pdf
first_indexed	2023-09-18T20:06:24Z
last_indexed	2023-09-18T20:06:24Z
_version_	1777407187202605056

Analysing the effect of portfolio concentration index and stock market correlation

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