Date of Publication
1-25-2021
Document Type
Bachelor's Thesis
Degree Name
Bachelor of Science in Management of Financial Institutions
Subject Categories
Corporate Finance | Finance and Financial Management
College
Ramon V. Del Rosario College of Business
Department/Unit
Financial Management Department
Thesis Advisor
Tomas Tiu
Defense Panel Chair
Joseph James Lago
Defense Panel Member
Vivian Eleazar
Julius Buendia
Abstract/Summary
Diversification of assets usually implies that a portfolio should contain a large number of assets. However, this paper constructed small but optimal portfolios called cardinality-constrained portfolios that can attain returns as good as large portfolios. This paper specifically constructed 3, 5, and 10-stock portfolios using the 26 consistent stocks of the benchmark Philippine Stock Exchange index (PSEi) for periods 2015-2019. Three statistical tools were applied to build these portfolios and evaluate their performance: the graduated non-convexity method, shrinkage estimator and stationary bootstrap. Aside from rebalancing the cardinality-constrained portfolios weekly and monthly, a cross-sectional analysis for their three- and five- year performances was conducted. Results showed that cardinality-constrained portfolios were able to beat the market based on mean return and Sharpe ratio. Specifically, for the 5-year results of mean returns, the best performing was the 3-stock for weekly rebalancing (0.209) and the 5-stock for monthly rebalancing (0.557). For the 3-year results of mean returns, the best performing was the 10-stock for weekly rebalancing (0.147) and the 3-stock for monthly rebalancing (-0.065). Meanwhile, for the 5-year results of the Sharpe ratio, the best performing was the 5-stock for weekly rebalancing (0.108) and the 3-stock for monthly rebalancing (0.042). For the 3-year results of the Sharpe ratio, the best performing was the 10-stock for weekly rebalancing (0.073) and the 5-stock for monthly rebalancing (-0.022).
Abstract Format
html
Language
English
Keywords
Portfolio management—Philippines; Stocks—Philippines
Recommended Citation
Cabador, J. C., Calo-oy, C. L., Duldulao, K. G., & Zamora, J. P. (2021). Cardinality-constrained approach: Small portfolios breakthrough in the Philippine market from January 2015 to December 2019. Retrieved from https://animorepository.dlsu.edu.ph/etdb_finman/16
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Embargo Period
2-3-2021
