Portfolio optimization in enhanced index tracking with goal programming approach

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

1 Citation (Scopus)

Abstract

Enhanced index tracking is a popular form of passive fund management in stock market. Enhanced index tracking aims to generate excess return over the return achieved by the market index without purchasing all of the stocks that make up the index. This can be done by establishing an optimal portfolio to maximize the mean return and minimize the risk. The objective of this paper is to determine the portfolio composition and performance using goal programming approach in enhanced index tracking and comparing it to the market index. Goal programming is a branch of multiobjective optimization which can handle decision problems that involve two different goals in enhanced index tracking, a trade-off between maximizing the mean return and minimizing the risk. The results of this study show that the optimal portfolio with goal programming approach is able to outperform the Malaysia market index which is FTSE Bursa Malaysia Kuala Lumpur Composite Index because of higher mean return and lower risk without purchasing all the stocks in the market index.

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.
Pages968-972
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
optimization
Malaysia
composite materials

Keywords

  • Mean return
  • Portfolio composition
  • Portfolio performance
  • Risk

ASJC Scopus subject areas

  • Physics and Astronomy(all)

Cite this

Siew, L. W., Jaaman @ Sharman, S. H., & Ismail, H. (2014). Portfolio optimization in enhanced index tracking with goal programming 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. 968-972). (AIP Conference Proceedings; Vol. 1614). American Institute of Physics Inc.. https://doi.org/10.1063/1.4895332

Portfolio optimization in enhanced index tracking with goal programming 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. 968-972 (AIP Conference Proceedings; Vol. 1614).

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

Siew, LW, Jaaman @ Sharman, SH & Ismail, H 2014, Portfolio optimization in enhanced index tracking with goal programming 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. 968-972, 2014 Postgraduate Colloquium of the Universiti Kebangsaan Malaysia, Faculty of Science and Technology, UKM FST 2014, Selangor, Malaysia, 9/4/14. https://doi.org/10.1063/1.4895332
Siew LW, Jaaman @ Sharman SH, Ismail H. Portfolio optimization in enhanced index tracking with goal programming 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. 968-972. (AIP Conference Proceedings). https://doi.org/10.1063/1.4895332
Siew, Lam Weng ; Jaaman @ Sharman, Saiful Hafizah ; Ismail, Hamizun. / Portfolio optimization in enhanced index tracking with goal programming 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. 968-972 (AIP Conference Proceedings).
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