Enhanced index tracking modeling in portfolio optimization with mixed-integer programming z approach

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Enhanced index tracking is a popular form of portfolio management in stock market investment. Enhanced index tracking aims to construct an optimal portfolio to generate excess return over the return achieved by the stock market index without purchasing all of the stocks that make up the index. The objective of this paper is to construct an optimal portfolio using mixed-integer programming model which adopts regression approach in order to generate higher portfolio mean return than stock market index return. In this study, the data consists of 24 component stocks in Malaysia market index which is FTSE Bursa Malaysia Kuala Lumpur Composite Index from January 2010 until December 2012. The results of this study show that the optimal portfolio of mixed-integer programming model is able to generate higher mean return than FTSE Bursa Malaysia Kuala Lumpur Composite Index return with only selecting 30% out of the total stock market index components.

Original languageEnglish
Title of host publication2014 UKM FST Postgraduate Colloquium - Proceedings of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology 2014 Postgraduate Colloquium
EditorsZahari Ibrahim, Haja Maideen Kader Maideen, Nazlina Ibrahim, Nurul Huda Abd Karim, Taufik Yusof, Fatimah Abdul Razak, Nurulkamal Maseran, Rozida Mohd Khalid, Noor Baa'yah Ibrahim, Hasidah Mohd. Sidek, Mohd Salmi Md Noorani, Norbert Simon
PublisherAmerican Institute of Physics Inc.
Pages918-922
Number of pages5
ISBN (Electronic)9780735412507
DOIs
Publication statusPublished - 1 Jan 2014
Event2014 Postgraduate Colloquium of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology, UKM FST 2014 - Selangor, Malaysia
Duration: 9 Apr 201411 Apr 2014

Publication series

NameAIP Conference Proceedings
Volume1614
ISSN (Print)0094-243X
ISSN (Electronic)1551-7616

Other

Other2014 Postgraduate Colloquium of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology, UKM FST 2014
CountryMalaysia
CitySelangor
Period9/4/1411/4/14

Fingerprint

programming
integers
optimization
Malaysia
composite materials
regression analysis

Keywords

  • Mean return
  • Portfolio composition
  • Portfolio performance
  • Regression
  • Tracking error

ASJC Scopus subject areas

  • Physics and Astronomy(all)

Cite this

Siew, L. W., Jaaman @ Sharman, S. H., & Ismail, H. (2014). Enhanced index tracking modeling in portfolio optimization with mixed-integer programming z approach. In Z. Ibrahim, H. M. K. Maideen, N. Ibrahim, N. H. A. Karim, T. Yusof, F. A. Razak, N. Maseran, R. M. Khalid, N. B. Ibrahim, H. M. Sidek, M. S. M. Noorani, ... N. Simon (Eds.), 2014 UKM FST Postgraduate Colloquium - Proceedings of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology 2014 Postgraduate Colloquium (pp. 918-922). (AIP Conference Proceedings; Vol. 1614). American Institute of Physics Inc.. https://doi.org/10.1063/1.4895324

Enhanced index tracking modeling in portfolio optimization with mixed-integer programming z approach. / Siew, Lam Weng; Jaaman @ Sharman, Saiful Hafizah; Ismail, Hamizun.

2014 UKM FST Postgraduate Colloquium - Proceedings of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology 2014 Postgraduate Colloquium. ed. / Zahari Ibrahim; Haja Maideen Kader Maideen; Nazlina Ibrahim; Nurul Huda Abd Karim; Taufik Yusof; Fatimah Abdul Razak; Nurulkamal Maseran; Rozida Mohd Khalid; Noor Baa'yah Ibrahim; Hasidah Mohd. Sidek; Mohd Salmi Md Noorani; Norbert Simon. American Institute of Physics Inc., 2014. p. 918-922 (AIP Conference Proceedings; Vol. 1614).

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Siew, LW, Jaaman @ Sharman, SH & Ismail, H 2014, Enhanced index tracking modeling in portfolio optimization with mixed-integer programming z approach. in Z Ibrahim, HMK Maideen, N Ibrahim, NHA Karim, T Yusof, FA Razak, N Maseran, RM Khalid, NB Ibrahim, HM Sidek, MSM Noorani & N Simon (eds), 2014 UKM FST Postgraduate Colloquium - Proceedings of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology 2014 Postgraduate Colloquium. AIP Conference Proceedings, vol. 1614, American Institute of Physics Inc., pp. 918-922, 2014 Postgraduate Colloquium of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology, UKM FST 2014, Selangor, Malaysia, 9/4/14. https://doi.org/10.1063/1.4895324
Siew LW, Jaaman @ Sharman SH, Ismail H. Enhanced index tracking modeling in portfolio optimization with mixed-integer programming z approach. In Ibrahim Z, Maideen HMK, Ibrahim N, Karim NHA, Yusof T, Razak FA, Maseran N, Khalid RM, Ibrahim NB, Sidek HM, Noorani MSM, Simon N, editors, 2014 UKM FST Postgraduate Colloquium - Proceedings of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology 2014 Postgraduate Colloquium. American Institute of Physics Inc. 2014. p. 918-922. (AIP Conference Proceedings). https://doi.org/10.1063/1.4895324
Siew, Lam Weng ; Jaaman @ Sharman, Saiful Hafizah ; Ismail, Hamizun. / Enhanced index tracking modeling in portfolio optimization with mixed-integer programming z approach. 2014 UKM FST Postgraduate Colloquium - Proceedings of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology 2014 Postgraduate Colloquium. editor / Zahari Ibrahim ; Haja Maideen Kader Maideen ; Nazlina Ibrahim ; Nurul Huda Abd Karim ; Taufik Yusof ; Fatimah Abdul Razak ; Nurulkamal Maseran ; Rozida Mohd Khalid ; Noor Baa'yah Ibrahim ; Hasidah Mohd. Sidek ; Mohd Salmi Md Noorani ; Norbert Simon. American Institute of Physics Inc., 2014. pp. 918-922 (AIP Conference Proceedings).
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