PORTFOLIO SELECTION TECHNIQUES TO THE SINGAPORE STOCK EXCHANGE

Abstract

In the past. Singapore could not offer many published aids to help her investors assess the risk of their impending investments. Today, as the economy develops and the securities market matures, such aids has become very easily accessible. However, in reality, few people actually examine risk scientifically. In fact, for most investors, investment decisions are more often than not based on their intuitive assessment of risk. This exercise therefore aims to show how an optimum portfolio can be selected quantitatively and how this information can be used as an aid in investment decisions. It is with this in mind that this exercise is embarked upon. This exercise does not attempt to explore all the portfolio selection techniques found in the field of investment. Instead, only four methods will be discussed. They are Markowitz Portfolio Selection Model, Sharpe Simplified Portfolio Selection Model, Elton and Gruber Simplified Portfolio Selection Model and Naive Diversification. These methods are discussed in Chapter II, III, IV and V respectively. However, before we begin with the discussion of portfolio analysis, certain basic concepts and terminologies essential to this exercise will be discussed in Chapter I.