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Allocation of Assets on the Ghana Stock Exchange (GSE)

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  • Lord Mensah
  • R. K. Avuglah
  • Vincent Dedu

Abstract

In this paper, we use stock price data between the years 2007 and 2010 to investigate the allocation of assets on the GSE. The Classical Markowitz optimization method shows that, the most profitable portfolio is obtained by investing 90% of wealth in non-financial assets and 10% in financial assets. Risk aversive investor who goes for the minimum risk portfolio has to invest 80% in non-financial assets and 20% in financial assets. We also find that, if the investor decides to split his wealth among the financial and non-financial asset equally, his profit will not be as much as the minimum and the optimum risk portfolio. In effect, there is a reward for risk on the GSE but the Markowitz optimization strategy never exceeds the buy and hold strategy of the market index.

Suggested Citation

  • Lord Mensah & R. K. Avuglah & Vincent Dedu, 2013. "Allocation of Assets on the Ghana Stock Exchange (GSE)," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 4(2), pages 108-114, April.
    • Handle: RePEc:jfr:ijfr11:v:4:y:2013:i:2:p:108-114
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    References listed on IDEAS

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    1. Markowitz, Harry M & Usmen, Nilufer, 1996. "The Likelihood of Various Stock Market Return Distributions, Part 1: Principles of Inference," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 207-219, November.
    2. Markowitz, Harry M & Usmen, Nilufer, 1996. "The Likelihood of Various Stock Market Return Distributions, Part 2: Empirical Results," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 221-247, November.
    3. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    4. Peiro, Amado, 1999. "Skewness in financial returns," Journal of Banking & Finance, Elsevier, vol. 23(6), pages 847-862, June.
    5. Eugene F. Fama & Kenneth R. French, 2004. "The Capital Asset Pricing Model: Theory and Evidence," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 25-46, Summer.
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    Cited by:

    1. Lord Mensah, 2016. "Asset Allocation Brewed Accross African Stock Markets," Proceedings of Economics and Finance Conferences 3205757, International Institute of Social and Economic Sciences.
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