GLOBAL SECTOR BETA

  • 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. 

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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://ejournal.upsi.edu.my/index.php/JCIT/article/view/876