Diversification across economic sectors and implication on portfolio investments in Malaysia
Views & Download
Due to the increasing efforts towards regional and global economic integration, the effects of "country specific" factors are becoming less important in managing domestic portfolio investments. Consequently the concept of diversification across economic sectors has received attention in literature. This paper analyzes the opportunity for diversification across different economic sectors for long-term investment using sectorial indices. The findings indicate high but unstable correlation of returns between indices. This implies that investment managers should account for potential movements in sector-specific and sub-sector-specific risks. The findings imply that investment in one or two sectors of the stock market face higher total risk than in the past due to the increasing "sector" effects on portfolio investment.
Portfolio , Diversification , Investment , Sectorial , Correlation
Muhamad Sori, Z., Ramadili Mohd, S. M., & Hassan, T. (2006). Diversification across economic sectors and implication on portfolio investments in Malaysia. International Journal of Economics and Management, 1 (1), pp. 155-172.