Portfolio Optimization Using Matrix Approach: A Case of Some Stocks on the Ghana Stock Exchange
International Journal of Accounting, Finance and Risk Management
Volume 2, Issue 1, January 2017, Pages: 21-30
Received: Sep. 11, 2016; Accepted: Nov. 25, 2016; Published: Feb. 13, 2017
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Abonongo John, College of Science, Department of Mathematics, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Anuwoje Ida Logubayom, Faculty of Mathematical Sciences, Department of Statistics, University for Development Studies, Navrongo, Ghana
Ackora-Prah J., College of Science, Department of Mathematics, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
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Analyzing risk has been a principal concern of actuarial and insurance professionals which plays a fundamental role in the theory of portfolio selection where the prime objective is to find a portfolio that maximizes expected return while reducing risk. Portfolio optimization has been applied to asset management and in building strategic asset allocation. The purpose of this paper is to construct optimal and efficient portfolios using the matrix approach. This paper used secondary data on 13 stocks (ETI, GCB, GOIL, TOTAL, FML, GGBL, CLYD, EGL, PZC, UNIL, TLW, AGA and BOPP) from the Ghana Stock Exchange (GSE) database comprising the monthly closing prices from the period 02/01/2004 to 16/01/2015. The results revealed that, all the portfolios were optimal and that portfolios 1, 2, 4, 5, 6, 9, 10, 11 and 12 with expected return 2.523, 2.593, 2.827, 3.642, 2.405, 2.812, 5.229, 3.559 and 5.928 respectively were efficient portfolios whereas portfolios 3, 7 and 8 with expected return 0.377, 0.699 and 0.152 respectively were inefficient portfolios with reference to the expected return of the global minimum variance portfolio (2.360). GGBL was seen as the stock with the highest allocation of wealth in most of the portfolios. Six out of the 12 portfolios had CLYD exhibiting the least asset allocation.
Portfolio Optimization, Efficient Frontier, Mean-Variance, Matrix Approach
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Abonongo John, Anuwoje Ida Logubayom, Ackora-Prah J., Portfolio Optimization Using Matrix Approach: A Case of Some Stocks on the Ghana Stock Exchange, International Journal of Accounting, Finance and Risk Management. Vol. 2, No. 1, 2017, pp. 21-30. doi: 10.11648/j.ijafrm.20170201.14
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