TAILIEUCHUNG - Measuring risk toleranve and establishing an optimal portfolio for individual investors in HOSE
This study is to estimate risk tolerance of investors in HCMC Stock Exchange (HOSE) and then work out a portfolio optimization model on the basis of risk tolerance known. To do thus, questionnaires, Markowitz portfolio theory, and the capital asset pricing model (CAPM) will be employed in the research. | RESEARCHES & DISCUSSIONS Vietnam, as compared to many other countries in the world, has been nurturing an infant stock market. This study is to estimate risk tolerance of investors in HCMC Stock Exchange (HOSE) and then work out a portfolio optimization model on the basis of risk tolerance known. To do thus, questionnaires, Markowitz portfolio theory, and the capital asset pricing model (CAPM) will be employed in the research. Keywords: risk tolerance, optimal portfolio, individual investor 1. Introduction Vietnam’s stock market, after a decade of development, has attracted a lot of both foreign and domestic investors. According to the State Securities Commission of Vietnam (SSC), this market until late October 2009, has had 766,725 accounts in total, wherein around 3,147 accounts are opened by organizations and 763,578 ones by individual investors (. making up ). Due to the fact that almost individual investors do not have sufficient knowledge of investment theories, they cannot make the best use of diversification so as to minimize investment risks. However, much as some individual investors also attend to diversification, they mainly base their decisions on sentiments instead of sensible investment strategies to undertake diversification; and thus the efficiency of diversification is not high enough. This paper is to measure the risk tolerance of individual investors in HOSE and then work out a portfolio optimization model on the ground of available data related stocks quoted in HOSE until April 1, 2009 and with the support of basic analyses, Markowitz portfolio theory, and CAPM. In remaining parts of the study, section 2 will focus on theoretical guides; the data and research methodology will be presented in section 3; section 4 discusses methods of establishing a specific portfolio; and session 5 will assume discussions and recommendations. 2. Theoretical guides a. Markowitz portfolio theory: In early 1950s, investors in the world tried in vain to
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