A Comparative Analysis of Sector Diversification in Australia, India and China
, and | Mar 19, 2024
About this article
Published Online: Mar 19, 2024
Page range: 76 - 100
Received: Aug 22, 2017
Accepted: Dec 22, 2017
DOI: https://doi.org/10.2478/fprj-2018-0004
© 2018 Suneel Maheshwari et al., published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.
ASX portfolio with different investment restrictions based on asymmetric DCC GARCH model estimated correlations.
| Consumer Discretionary | Consumer Staples | Energy | Health Care Index | Industries | Information Technology | Materials | Real Estate | Telecommunications Services | Optimal Portfolio Return | Portfolio Standard Deviation | Sharpe Ratio | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Investment weights (Equally weighted) | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 8.35 % | 16.57 % | 0.3528 |
| Investment weights (no short sell) | 0.00 % | 0.00 % | 30.56 % | 54.72 % | 0.00 % | 5.76 % | 8.96 % | 0.00 % | 0.00 % | 16.48 % | 14.76 % | 0.9474 |
| Investment weights (no short sell with max 50% in one sector) | 0.00 % | 0.00 % | 32.15 % | 50.00 % | 0.00 % | 7.81 % | 10.04 % | 0.00 % | 0.00 % | 16.43 % | 14.70 % | 0.9475 |
| Investment weights (no short sell with max 20% in one sector) | 0.00 % | 0.00 % | 20.00 % | 20.00 % | 20.00 % | 20.00 % | 20.00 % | 0.00 % | 0.00 % | 13.57 % | 13.72 % | 0.8069 |
| Investment weights (100% short sale) | -4.98 % | -10.89 % | 50.75 % | 49.93 % | 49.75 % | -5.65 % | 28.46 % | -50.08 % | -7.29 % | 43.40 % | 21.66 % | 1.8883 |
| Investment weights (100% short sale with max 50% in one sector) | -4.47 % | -10.90 % | 50.00 % | 49.82 % | 49.78 % | -5.59 % | 28.42 % | -49.93 % | -7.13 % | 33.38 % | 18.27 % | 1.8270 |
| Investment weights (100% short sale with max 20% in one sector) | 20.00 % | 20.00 % | 20.0 % | 20.00 % | 20.00 % | 20.00 % | 20.00 % | -60.00 % | 20.00 % | 23.24 % | 16.46 % | 1.4119 |
SSE portfolio with different investment restrictions based on asymmetric DCC GARCH model estimated correlations
| Consumer Discretionary | Consumer Staples | Energy | Financials | Health Care | Industrials | Materials | Telecommunications Service | Utilities | Optimal Portfolio Return | Portfolio Standard Deviation | Sharpe Ratio | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Investment weights (Equally weighted) | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 19.54 % | 14.69 % | 0.9213 |
| Investment weights (no short sell) | 0.00 % | 63.13% | 0.00% | 25.21 % | 11.66 % | 0.00 % | 0.00 % | 0.00 % | 0.00 % | 28.87 % | 16.24 % | 1.4080 |
| Investment weights (no short sell with max 50% in one sector) | 0.00 % | 50.00 % | 0.00 % | 29.43 % | 20.57 % | 0.00 % | 0.00 % | 0.00 % | 0.00 % | 28.03 % | 15.77 % | 1.3968 |
| Investment weights (no short sell with max 20% in one sector) | 13.97 % | 20.00 % | 20.00 % | 20.00 % | 20.00 % | 0.00 % | 5.69 % | 0.00 % | 0.52 % | 24.05 % | 16.32 % | 1.1776 |
| Investment weights (100% short sale) | -7.23 % | 97.01 % | 14.56 % | 42.33 % | 28.59 % | -28.70 % | -10.53 % | -18.09 % | -17.96 % | 39.69 % | 21.84 % | 1.5430 |
| Investment weights (100% short sale with max 50% in one sector) | -1.87 % | 50.00 % | 14.78 % | 41.74 % | 38.12 % | -15.09 % | -4.86 % | -12.50 % | -10.33 % | 32.62 % | 18.11 % | 1.4697 |
| Investment weights (100% short sale with max 20% in one sector) | 17.98 % | 20.00 % | 20.00 % | 20.00 % | 20.00 % | -7.55 % | 8.87 % | -3.83 % | 4.53 % | 24.43 % | 15.58 % | 1.1831 |
Nine sector indices equally weighted portfolio (out of sample)
| ASX in Australia | NSE in India | SSE in China | |
|---|---|---|---|
| Portfolio mean Annual return | 8.67% | 4.94% | -2.19% |
| Portfolio standard deviation | 9.47% | 1.17% | 11.69% |
| Sharpe ratio | 0.6521 | -1.7626 | -.7006 |
Summary statistics of sector indices – ASX, SSE, and NSE
| Consumer Discretionary | 2004/4/14-2012/4/13 | 2087 | -0.0062% | 0.0295% | -0.0895 | -14.3601% | 8.8923% | 23.2524% |
| Consumer Staples | 2004/4/14-2012/4/13 | 2087 | 0.0422% | 0.0267% | -1.1054 | -17.8561% | 9.6798% | 37.5360% |
| Energy | 2004/4/14-2012/4/13 | 2087 | 0.0615% | 0.0483% | -0.8292 | -19.8730% | 13.0450% | 32.9180% |
| ASX 200 Health Care Index | 2004/4/14-2012/4/13 | 2087 | 0.0573% | 0.0286% | -0.7165 | -13.9715% | 8.8720% | 22.8434% |
| Industries | 2004/4/14-2012/4/13 | 2087 | 0.0193% | 0.0298% | -0.8702 | -15.8409% | 8.4423% | 24.2832% |
| Information Technology | 2004/4/14-2012/4/13 | 2087 | 0.0498% | 0.0454% | 0.4556 | -15.8558% | 12.6206% | 28.4764% |
| Materials | 2004/4/14-2012/4/13 | 2087 | 0.0508% | 0.0554% | -0.6826 | -16.1608% | 11.7786% | 27.9394% |
| Real Estate | 2004/4/14-2012/4/13 | 2087 | -0.0118% | 0.0411% | -1.1577 | -18.4891% | 10.1560% | 28.6451% |
| Telecommunications Services | 2004/4/14-2012/4/13 | 2087 | 0.0006% | 0.0298% | -0.7163 | -13.2126% | 8.2886% | 21.5012% |
| Consumer Discretionary | 2005/1/4-2012/4/13 | 1898 | 0.0653% | 0.0438% | -0.6002 | -10.1840% | 9.2418% | 19.4258% |
| Consumer Staples | 2005/1/4-2012/4/13 | 1898 | 0.1040% | 0.0375% | -0.3588 | -10.0824% | 8.6832% | 18.7656% |
| Energy | 2005/1/4-2012/4/13 | 1898 | 0.0733% | 0.0504% | -0.1526 | -9.7384% | 9.2123% | 18.9506% |
| Financials | 2005/1/4-2012/4/13 | 1898 | 0.0835% | 0.0461% | -0.1012 | -9.4742% | 9.5227% | 18.9968% |
| Health Care | 2005/1/4-2012/4/13 | 1898 | 0.0857% | 0.0419% | -0.5047 | -9.9085% | 9.2736% | 19.1821% |
| Industrials | 2005/1/4-2012/4/13 | 1898 | 0.0453% | 0.0392% | -0.4705 | -9.6167% | 9.5346% | 19.1513% |
| Materials | 2005/1/4-2012/4/13 | 1898 | 0.0612% | 0.0480% | -0.4250 | -9.5166% | 8.2052% | 17.7218% |
| Telecommunications Services | 2005/1/4-2012/4/13 | 1898 | 0.0460% | 0.0533% | -0.2445 | -10.4016% | 9.5988% | 20.0004% |
| Utilities | 2005/1/4-2012/13 | 1898 | 0.0443% | 0.0358% | -0.5564 | -10.2425% | 8.1968% | 18.4393% |
| Automobile | 2004/4/14-2012/4/13 | 2087 | 0.0484% | 0.0508% | -0.1788 | -13.5417% | 17.2685% | 30.8102% |
| Banking | 2004/4/14-2012/4/13 | 2087 | 0.0543% | 0.0565% | -0.1451 | -15.3694% | 19.8858% | 35.2553% |
| Energy | 2004/4/14-2012/4/13 | 2087 | 0.1203% | 0.0691% | -0.1176 | -19.5035% | 18.2817% | 37.7852% |
| Financial | 2004/4/14-2012/4/13 | 2087 | 0.0823% | 0.0421% | 0.1709 | -9.9427% | 13.4082% | 23.3510% |
| Fast Moving Consumer Goods | 2004/4/14-2012/4/13 | 2087 | 0.0603% | 0.0220% | 0.1068 | -6.8357% | 9.2418% | 16.0775% |
| Information Technology | 2004/4/14-2012/4/13 | 2087 | 0.0414% | 0.0421% | -0.0185 | -13.9893% | 14.6993% | 28.6886% |
| Midea | 2004/4/14-2012/4/13 | 2087 | 0.0847% | 0.0633% | 0.2265 | -11.9898% | 20.0595% | 32.0492% |
| Metal | 2004/4/14-2012/4/13 | 2087 | -0.0602% | 0.0989% | 0.3840 | -44.3656% | 44.0013% | 88.3669% |
| Pharmaceuticals | 2004/4/14-2012/4/13 | 2087 | 0.0467% | 0.0209% | -0.4688 | -9.1241% | 12.6615% | 21.7857% |
NSE portfolio with different investment restrictions based on asymmetric DCC GARCH model estimated correlations.
| Automobile | Banking | Energy | Financial | Fast Moving Consumer Goods | Information Technology | Midea | Metal | Pharmaceuticals | Optimal Portfolio Return | Portfolio Standard Deviation | Sharpe Ratio | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Investment weights (Equally weighted) | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 11.11 % | 15.74 % | 13.60 % | 0.6428 |
| Investment weights (no short sell) | 0.00 % | 0.00 % | 39.86 % | 28.82 % | 14.48 % | 0.00 % | 16.83 % | 0.00 % | 0.00 % | 28.34 % | 15.61 % | 1.3678 |
| Investment weights (no short sell with max 50% in one sector) | 0.00 % | 0.00 % | 39.86 % | 28.82 % | 14.48 % | 0.00 % | 16.83 % | 0.00 % | 0.00 % | 28.34 % | 15.61 % | 1.3678 |
| Investment weights (no short sell with max 20% in one sector) | 0.00 % | 0.00 % | 20.00 % | 20.00 % | 20.00 % | 0.00 % | 20.00 % | 0.00 % | 2.00 % | 23.21 % | 12.70 % | 1.2492 |
| Investment weights (100% short sale) | -9.15 % | -5.89 % | 50.28 % | 49.87 % | 49.87 % | -5.80 % | 28.53 % | -50.36 % | -7.33 % | 49.81 % | 23.11 % | 1.8526 |
| Investment weights (100% short sale with max 50% in one sector) | -9.12 % | -5.90 % | 50.00 % | 49.76 % | 49.90 % | -5.74 % | 28.49 % | -50.22 % | -7.18 % | 49.69 % | 23.04 % | 1.8526 |
| Investment weights (100% short sale with max 20% in one sector) | 9.58 % | 8.95 % | 20.00 % | 20.00 % | 20.00 % | 14.68 % | 20.00 % | -33.21 % | 20.00 % | 32.39 % | 16.00 % | 1.5872 |
Out of sample test result
| ASX | NSE | SSE | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Optimal portfolio return | Portfolio standard deviation | Sharpe ratio | Optimal portfolio return | Portfolio standard deviation | Sharpe ratio | Optimal portfolio return | Portfolio standard deviation | Sharpe ratio | |
| Investment weights (no short sell) | 19.99% | 9.32% | 1.8770 | 16.53% | 11.12% | 0.8567 | 21.56% | 13.98% | 1.1134 |
| Investment weights (no short sell & maximum 20% weights in single sector) | 19.54% | 9.16% | 1.8602 | 15.03% | 12.25% | 0.6555 | 13.35% | 12.99% | 0.5659 |
| Investment weights (no short sell & maximum 50% weights in single sector) | 15.32% | 9.66% | 1.3271 | 13.53% | 10.05% | 0.6490 | 6.28% | 11.68% | 0.0243 |
| Investment weights (maximum 100% short sell) | 84.71% | 26.31% | 3.1249 | 79.67% | 35.43% | 2.0509 | 95.49% | 27.61% | 3.2411 |
| Investment weights (maximum 100% short sell & maximum 20% weights in single sector) | 48.57% | 17.17% | 2.6823 | 51.09% | 24.24% | 1.8184 | 54.80% | 19.10% | 2.5579 |
| Investment weights (maximum 100% short sell & maximum 50% weights in single sector) | 21.35% | 10.40% | 1.8119 | 20.80% | 17.08% | 0.8083 | 12.22% | 12.22% | 0.9052 |
Benchmark index
| ASX in Australia | NSE in India | SSE in China | |
|---|---|---|---|
| Portfolio mean Annual return | 8.35% | 15.74% | 19.54% |
| Portfolio standard deviation | 16.62% | 16.51% | 18.70% |
| Sharpe ratio | 0.3517 | 0.5296 | 0.7237 |
Sector indices list
| ASX 200 Consumer Discretionary Index | Consumer Discretionary | 2004/4/14-2012/4/13 | 2087 |
| ASX 200 Consumer Staples Index | Consumer Staples | 2004/4/14-2012/4/13 | 2087 |
| ASX 200 Energy Index | Energy | 2004/4/14-2012/4/13 | 2087 |
| ASX 200 Health Care Index | ASX 200 Health Care Index | 2004/4/14-2012/4/13 | 2087 |
| ASX 200 Industrials Index | Industries | 2004/4/14-2012/4/13 | 2087 |
| ASX 200 Information Technology Index | Information Technology | 2004/4/14-2012/4/13 | 2087 |
| ASX 200 Materials Index | Materials | 2004/4/14-2012/4/13 | 2087 |
| ASX 200 Real Estate Index | Real Estate | 2004/4/14-2012/4/13 | 2087 |
| ASX 200 Telecommunications Services Index | Telecommunications Services | 2004/4/14-2012/4/13 | 2087 |
| SSE Consumer Discretionary Sector Index | Consumer Discretionary | 2005/1/4-2012/4/13 | 1898 |
| SSE Consumer Staples Sector Index | Consumer Staples | 2005/1/4-2012/4/13 | 1898 |
| SSE Energy Sector Index | Energy | 2005/1/4-2012/4/13 | 1898 |
| SSE Financials Sector Index | Financials | 2005/1/4-2012/4/13 | 1898 |
| SSE Health Care Sector Index | Health Care | 2005/1/4-2012/4/13 | 1898 |
| SSE Industrials Sector Index | Industrials | 2005/1/4-2012/4/13 | 1898 |
| SSE Materials Index | Materials | 2005/1/4-2012/4/13 | 1898 |
| SSE Telecommunications Services Sector Index | Telecommunications Services | 2005/1/4-2012/4/13 | 1898 |
| SSE Utilities Sector Index | Utilities | 2005/1/4-2012/4/13 | 1898 |
| CNX Automobile Sector Index | Automobile | 2004/4/14-2012/4/13 | 2087 |
| CNX Banking Sector Index | Banking | 2004/4/14-2012/4/13 | 2087 |
| CNX Energy Sector Index | Energy | 2004/4/14-2012/4/13 | 2087 |
| CNX Financial Sector Index | Financial | 2004/4/14-2012/4/13 | 2087 |
| CNX Fast Moving Consumer Goods Sector Index | Fast Moving Consumer Goods | 2004/4/14-2012/4/13 | 2087 |
| CNX Information Technology Sector Index | Information Technology | 2004/4/14-2012/4/13 | 2087 |
| CNX Midea Sector | Midea | 2004/4/14-2012/4/13 | 2087 |
| CNX Metal Sector | Metal | 2004/4/14-2012/4/13 | 2087 |
| CNX Pharmaceuticals Sector Index | Pharmaceuticals | 2004/4/14-2012/4/13 | 2087 |