Strategic Decision Making in Portfolio Management with Goal Programming Model

Lam Weng Siew; Lam Weng Hoe

doi:doi:10.11648/j.ajomis.20160101.14

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Strategic Decision Making in Portfolio Management with Goal Programming Model

Lam Weng Siew, Lam Weng Hoe

Published in American Journal of Operations Management and Information Systems (Volume 1, Issue 1)

Received: 23 October 2016 Accepted: 12 November 2016 Published: 12 December 2016

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Abstract

Enhanced index tracking is a popular type of portfolio management which aims to construct the optimal portfolio in order to generate higher portfolio mean return than the benchmark index mean return. Enhanced index tracking is a dual objective optimization problem which can be represented by a goal programming model to determine the trade-off between maximizing the portfolio mean return and minimizing the tracking error. The objective of this paper is to apply the goal programming model in constructing the optimal portfolio to track the Technology Index in Malaysia. In this study, the data consists of weekly return of the companies from technology sector in Malaysia stock market. The results of this study indicate that the optimal portfolio is able to outperform Technology Index by generating weekly excess mean return 0.3798% at minimum tracking error 2.0980%. The significance of this study is to identify and apply the goal programming model as a strategic decision-making tool for the fund managers to track the benchmark Technology Index effectively in Malaysia stock market.

Published in	American Journal of Operations Management and Information Systems (Volume 1, Issue 1)
DOI	10.11648/j.ajomis.20160101.14
Page(s)	34-38
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2016. Published by Science Publishing Group

Keywords

Goal Programming Model, Enhanced Index Tracking, Optimal Portfolio, Mean Return, Tracking Error

References

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[3]	L. C. Wu, S. C. Chou, C. C. Yang, and C. S. Ong, “Enhanced Index Investing Based on Goal Programming,” The Journal of Portfolio Management, vol. 33, pp. 49-56, 2007.
[4]	N. A. Canakgoz, and J. E. Beasley, “Mixed integer programming approaches for index tracking and enhanced indexation,” European Journal of Operational Research, vol. 196, pp. 384-399, 2008.
[5]	G. Guastaroba, and M. G. Speranza, “Kernel Search: An application to index tracking problem,” European Journal of Operational Research, vol. 217, pp. 54-68, 2012.
[6]	W. S. Lam, J. Saiful, and I. Hamizun, “The impact of different economic scenarios towards portfolio selection in enhanced index tracking problem,” Advanced Science Letters, vol. 21, no. 5, pp. 1285-1288, 2015.
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APA Style

Lam Weng Siew, Lam Weng Hoe. (2016). Strategic Decision Making in Portfolio Management with Goal Programming Model. American Journal of Operations Management and Information Systems, 1(1), 34-38. https://doi.org/10.11648/j.ajomis.20160101.14

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ACS Style

Lam Weng Siew; Lam Weng Hoe. Strategic Decision Making in Portfolio Management with Goal Programming Model. Am. J. Oper. Manag. Inf. Syst. 2016, 1(1), 34-38. doi: 10.11648/j.ajomis.20160101.14

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AMA Style

Lam Weng Siew, Lam Weng Hoe. Strategic Decision Making in Portfolio Management with Goal Programming Model. Am J Oper Manag Inf Syst. 2016;1(1):34-38. doi: 10.11648/j.ajomis.20160101.14

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@article{10.11648/j.ajomis.20160101.14,
  author = {Lam Weng Siew and Lam Weng Hoe},
  title = {Strategic Decision Making in Portfolio Management with Goal Programming Model},
  journal = {American Journal of Operations Management and Information Systems},
  volume = {1},
  number = {1},
  pages = {34-38},
  doi = {10.11648/j.ajomis.20160101.14},
  url = {https://doi.org/10.11648/j.ajomis.20160101.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajomis.20160101.14},
  abstract = {Enhanced index tracking is a popular type of portfolio management which aims to construct the optimal portfolio in order to generate higher portfolio mean return than the benchmark index mean return. Enhanced index tracking is a dual objective optimization problem which can be represented by a goal programming model to determine the trade-off between maximizing the portfolio mean return and minimizing the tracking error. The objective of this paper is to apply the goal programming model in constructing the optimal portfolio to track the Technology Index in Malaysia. In this study, the data consists of weekly return of the companies from technology sector in Malaysia stock market. The results of this study indicate that the optimal portfolio is able to outperform Technology Index by generating weekly excess mean return 0.3798% at minimum tracking error 2.0980%. The significance of this study is to identify and apply the goal programming model as a strategic decision-making tool for the fund managers to track the benchmark Technology Index effectively in Malaysia stock market.},
 year = {2016}
}

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TY  - JOUR
T1  - Strategic Decision Making in Portfolio Management with Goal Programming Model
AU  - Lam Weng Siew
AU  - Lam Weng Hoe
Y1  - 2016/12/12
PY  - 2016
N1  - https://doi.org/10.11648/j.ajomis.20160101.14
DO  - 10.11648/j.ajomis.20160101.14
T2  - American Journal of Operations Management and Information Systems
JF  - American Journal of Operations Management and Information Systems
JO  - American Journal of Operations Management and Information Systems
SP  - 34
EP  - 38
PB  - Science Publishing Group
SN  - 2578-8310
UR  - https://doi.org/10.11648/j.ajomis.20160101.14
AB  - Enhanced index tracking is a popular type of portfolio management which aims to construct the optimal portfolio in order to generate higher portfolio mean return than the benchmark index mean return. Enhanced index tracking is a dual objective optimization problem which can be represented by a goal programming model to determine the trade-off between maximizing the portfolio mean return and minimizing the tracking error. The objective of this paper is to apply the goal programming model in constructing the optimal portfolio to track the Technology Index in Malaysia. In this study, the data consists of weekly return of the companies from technology sector in Malaysia stock market. The results of this study indicate that the optimal portfolio is able to outperform Technology Index by generating weekly excess mean return 0.3798% at minimum tracking error 2.0980%. The significance of this study is to identify and apply the goal programming model as a strategic decision-making tool for the fund managers to track the benchmark Technology Index effectively in Malaysia stock market.
VL  - 1
IS  - 1
ER  -

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Author Information

Lam Weng Siew

Faculty of Science, Universiti Tunku Abdul Rahman, Kampar, Malaysia
Lam Weng Hoe

Faculty of Science, Universiti Tunku Abdul Rahman, Kampar, Malaysia

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APA Style

Lam Weng Siew, Lam Weng Hoe. (2016). Strategic Decision Making in Portfolio Management with Goal Programming Model. American Journal of Operations Management and Information Systems, 1(1), 34-38. https://doi.org/10.11648/j.ajomis.20160101.14

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ACS Style

Lam Weng Siew; Lam Weng Hoe. Strategic Decision Making in Portfolio Management with Goal Programming Model. Am. J. Oper. Manag. Inf. Syst. 2016, 1(1), 34-38. doi: 10.11648/j.ajomis.20160101.14

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AMA Style

Lam Weng Siew, Lam Weng Hoe. Strategic Decision Making in Portfolio Management with Goal Programming Model. Am J Oper Manag Inf Syst. 2016;1(1):34-38. doi: 10.11648/j.ajomis.20160101.14

Copy | Download

@article{10.11648/j.ajomis.20160101.14,
  author = {Lam Weng Siew and Lam Weng Hoe},
  title = {Strategic Decision Making in Portfolio Management with Goal Programming Model},
  journal = {American Journal of Operations Management and Information Systems},
  volume = {1},
  number = {1},
  pages = {34-38},
  doi = {10.11648/j.ajomis.20160101.14},
  url = {https://doi.org/10.11648/j.ajomis.20160101.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajomis.20160101.14},
  abstract = {Enhanced index tracking is a popular type of portfolio management which aims to construct the optimal portfolio in order to generate higher portfolio mean return than the benchmark index mean return. Enhanced index tracking is a dual objective optimization problem which can be represented by a goal programming model to determine the trade-off between maximizing the portfolio mean return and minimizing the tracking error. The objective of this paper is to apply the goal programming model in constructing the optimal portfolio to track the Technology Index in Malaysia. In this study, the data consists of weekly return of the companies from technology sector in Malaysia stock market. The results of this study indicate that the optimal portfolio is able to outperform Technology Index by generating weekly excess mean return 0.3798% at minimum tracking error 2.0980%. The significance of this study is to identify and apply the goal programming model as a strategic decision-making tool for the fund managers to track the benchmark Technology Index effectively in Malaysia stock market.},
 year = {2016}
}

Copy | Download

TY  - JOUR
T1  - Strategic Decision Making in Portfolio Management with Goal Programming Model
AU  - Lam Weng Siew
AU  - Lam Weng Hoe
Y1  - 2016/12/12
PY  - 2016
N1  - https://doi.org/10.11648/j.ajomis.20160101.14
DO  - 10.11648/j.ajomis.20160101.14
T2  - American Journal of Operations Management and Information Systems
JF  - American Journal of Operations Management and Information Systems
JO  - American Journal of Operations Management and Information Systems
SP  - 34
EP  - 38
PB  - Science Publishing Group
SN  - 2578-8310
UR  - https://doi.org/10.11648/j.ajomis.20160101.14
AB  - Enhanced index tracking is a popular type of portfolio management which aims to construct the optimal portfolio in order to generate higher portfolio mean return than the benchmark index mean return. Enhanced index tracking is a dual objective optimization problem which can be represented by a goal programming model to determine the trade-off between maximizing the portfolio mean return and minimizing the tracking error. The objective of this paper is to apply the goal programming model in constructing the optimal portfolio to track the Technology Index in Malaysia. In this study, the data consists of weekly return of the companies from technology sector in Malaysia stock market. The results of this study indicate that the optimal portfolio is able to outperform Technology Index by generating weekly excess mean return 0.3798% at minimum tracking error 2.0980%. The significance of this study is to identify and apply the goal programming model as a strategic decision-making tool for the fund managers to track the benchmark Technology Index effectively in Malaysia stock market.
VL  - 1
IS  - 1
ER  -

Copy | Download