Testing of Portfolio Optimization by Timor-Leste Portfolio Investment Strategy on the Stock Market

Fernando Anuno (), Mara Madaleno and Elisabete Vieira
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Fernando Anuno: Faculty of Economics and Management, National University of Timor Lorosa’e (UNTL), Avenida Cidade de Lisboa, Díli 10000, Timor-Leste
Mara Madaleno: GOVCOPP—Research Unit on Governance, Competitiveness and Public Policies, Department of Economics, Management, Industrial Engineering and Tourism (DEGEIT), University of Aveiro, Campus Universitário de Santiago, 3810-193 Aveiro, Portugal
Elisabete Vieira: GOVCOPP Unit Research, Aveiro Institute of Accounting and Administration, University of Aveiro (ISCA-UA), Campus Universitário de Santiago, 3810-902 Aveiro, Portugal

JRFM, 2024, vol. 17, issue 2, 1-22

Abstract: An efficient and effective portfolio provides maximum return potential with minimum risk by choosing an optimal balance among assets. Therefore, the objective of this study is to analyze the performance of optimized portfolios in minimizing risk and achieving maximum returns in the dynamics of Timor-Leste’s equity portfolio in the international capital market for the period from January 2006 to December 2019. The empirical findings of this study indicate that the correlation matrix showed that JPM has a very strong positive correlation with one of the twenty assets, namely BAC (0.80). Moreover, the optimal portfolio of the twenty stocks exceeding 10% consists of four consecutive stocks, namely DGE.L (10.69%), NSRGY (10.37%), JPM (10.04%), and T (10.03%). In addition, the minimum portfolio consists of two stocks with a minimum variance of more than 10%, namely SAP.DE (11.20%) and DGE.L (10.39%). The evaluation of the optimal portfolio using Markowitz parameters also showed that the highest expected return and the lowest risk were 1.22% and 3.12%, respectively.

Keywords: portfolio performance; mean-variance portfolio; Timor-Leste (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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