GLOBAL SECTOR BETA

Authors

  • Bee-Hong Tay Universiti Teknologi MARA
  • Zulkifli Mohamed Universiti Teknologi MARA

Keywords:

Global sector beta, Diversification, International portfolio management

Abstract

This paper aims to study the extent of variation in global sector beta in making international portfolio investment decisions. Market model is used to determine global sector beta and the variation in beta value is determined by investigating the stability of the global sector beta from different sub-periods right through the year 1990 to 2010. Monthly global sector price index and global market index are sourced from DataStream. Global sector that exhibits high variation in beta value is less stable; likewise, global sector with low beta variation is regarded as more stable and preferable sector to invest for investors who wish to diversify into internatonal global sector portfolio. The resuts of the study indicate that Health Care, Consumer Services and Financial Sector for Singapore as well as Oil and Gas and Financial Sectors for UK are sectors with the relatively stable beta. On the other hand, Oil and Gas, Basic Materials and Technology sector for Singapore as well as Basic materials, Consumer goods, Telecommunication and Technology sector for UK are the sectors with unstable beta values. Even though the sector's beta value estimation has it weaknesses, but it practically has helped investors to identify the weak and negative correlation stocks to be included in the portfolio. These kinds of stocks are believed to be able to maximize portfolio's diversification benefit. 

Downloads

Download data is not yet available.

References

Zhou, Z.H. (1998). Chinese Accounting Systems and Practices. Accounting, Organizations and Society, 13(2), 207-24.

Baca, S Garbe, B. & Weiss, R (2000). The Rise of Sector effects in Major Equity Markets. Financial Analyst Journal, 56, 3440.

Brooks, RD. & Shoung, LC. (2006). The Impact of Capital Controls on Malaysian Banking Industry Betas. Applied Financial Economics Letter, 2, 247-249

Cavaglia, S., Brightman, C. and Aked, M. (2000). The Increasing Importance of Industry Factors. Financial Analyst Journal, 56, 41-54.

Ferreira, M.A. & Gama, P.M. (2010). Correlation Dynamics of Global Industry Portfolios. Journal of Multinational Financial Management, 20, 35-47.

Ferreira, M.A. & Ferreira, M.A. (2006). The Importance if Industry and Country Effects in the EMU Equity Markets. European Financial Management, 12(3), 341-373.

Gong S.X.H ~ Firth,M. & Cullinane, K. (2006). Beta Estimation and Stability in the US-Listed International Transportation Industry. Review of Pacc Basin Financial Markets and Policies, 9(3), 463-490.

Griffin, J.M & Karolyi, G.A. Another Look at the Role of the Industrial Structure of Markets for International Diversification Strategl'es. Journal of Financial Economics, 50(3), 351-373.

Heston, S.L. & Raouwenhorst, K.G. (1994), Does industrial Structure Explain the Benefits of International Diversification? Journal of Financial ecoonomics, 36(I), 3-27.

L'Her, J.F., Sy, O., & Tnani, M.Y. (2002). Country, lndustry, and Risk Factor_Loadings in Portfolio_Management. Journal of Portfolio Management, Vol. 28(4), 70-79.

Lie, F. & Faff, R. (2003), Global Industry Beta. Applied Economics Letters, 10, 21-26.

Rawer, M., Meric, I., & Meric, G. (2006). Sector dispersion and stock market predictability. Journal of Investing, 15, 56-61.

Rouwenhorst, K.G. European Equity Markets and the EMU. Financial Analysts Journal, Vol. 55, No 3, 57-64.

Returns and Co-Movements Of Domestic and Country Index Funds: Global Portfolio Diversification Implications.Full Text Available By: Meric, Gulser; Welsh, Carol N.; Weidman, Stephanie M.; Merle, lIhan. Journal of Global Business Issues, Summer/Fall2OO8, Vol. 2 Issue 2, p115-124, 10p, 6 Charts; (AN 34410949)

Downloads

Published

2019-03-05

How to Cite

Tay, B.-H., & Mohamed, Z. (2019). GLOBAL SECTOR BETA. Journal of Contemporary Issues and Thought, 1, 10–18. Retrieved from https://ojs.upsi.edu.my/index.php/JCIT/article/view/876