Investigation on relationship between human behavior and portfolio selection problem in malaysia using decision making model

Research output: Contribution to journalArticle

Abstract

Background: Different level of risk aversion is important to understand the human behavior. In portfolio selection, the human behavior exhibits different level of risk aversion in finding a trade-off between maximizing the return and minimizing the risk of loss. The human with low risk aversion aims to set the first priority in maximizing the return. On the other hand, the human with high risk aversion desires to set the first priority in minimizing the risk of loss. Objective: The objective of this paper is to study the relationship between the human behavior and portfolio selection problem in Malaysia. In this study, the decision making model is applied in portfolio selection to reflect the human behavior towards different level of risk aversion. The objective function of the decision making model is to find a trade-off between maximizing the return and minimizing the risk of loss according to the priority. The portfolio selection is developed for the human with low and high risk aversion. Besides that, the portfolio performance for the human with low and high risk aversion is compared in terms of mean return and risk. In this study, the data consists of weekly price of 23 stocks in Malaysia market from January 2010 until December 2013. Results: The results of this study indicate that the human with low and high risk aversion give different portfolio selection and portfolio performance in Malaysia. This is because the human with different level of risk aversion sets different priority between minimizing the risk of loss and maximizing the return. Conclusion: In conclusion, the human with different level of risk aversion gives different portfolio selection and portfolio performance in Malaysia. The significance of this study is to understand the relationship between the human behavior and portfolio selection problem in Malaysia. This study helps the fund managers to select the suitable portfolio according to their level of risk aversion.

Original languageEnglish
Pages (from-to)6-10
Number of pages5
JournalAdvances in Environmental Biology
Volume9
Issue number7
Publication statusPublished - 1 Jan 2015

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human behavior
Malaysia
decision support systems
Decision Making
decision making
trade-off
Financial Management
background level

Keywords

  • Decision making model
  • Human behaviour
  • Priority
  • Return and portfolio selection
  • Risk
  • Risk aversion

ASJC Scopus subject areas

  • Environmental Science(all)
  • Agricultural and Biological Sciences(all)

Cite this

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title = "Investigation on relationship between human behavior and portfolio selection problem in malaysia using decision making model",
abstract = "Background: Different level of risk aversion is important to understand the human behavior. In portfolio selection, the human behavior exhibits different level of risk aversion in finding a trade-off between maximizing the return and minimizing the risk of loss. The human with low risk aversion aims to set the first priority in maximizing the return. On the other hand, the human with high risk aversion desires to set the first priority in minimizing the risk of loss. Objective: The objective of this paper is to study the relationship between the human behavior and portfolio selection problem in Malaysia. In this study, the decision making model is applied in portfolio selection to reflect the human behavior towards different level of risk aversion. The objective function of the decision making model is to find a trade-off between maximizing the return and minimizing the risk of loss according to the priority. The portfolio selection is developed for the human with low and high risk aversion. Besides that, the portfolio performance for the human with low and high risk aversion is compared in terms of mean return and risk. In this study, the data consists of weekly price of 23 stocks in Malaysia market from January 2010 until December 2013. Results: The results of this study indicate that the human with low and high risk aversion give different portfolio selection and portfolio performance in Malaysia. This is because the human with different level of risk aversion sets different priority between minimizing the risk of loss and maximizing the return. Conclusion: In conclusion, the human with different level of risk aversion gives different portfolio selection and portfolio performance in Malaysia. The significance of this study is to understand the relationship between the human behavior and portfolio selection problem in Malaysia. This study helps the fund managers to select the suitable portfolio according to their level of risk aversion.",
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