Asset Allocation Model for Private Investment

Abstract

In this paper, we give preliminary results of the asset allocation in five assets classes: common stocks (SET50 TRI), property & construction stocks (PROPCON TRI) government bonds (GBI TRI), gold bullion and 1-year fixed deposit in order to select the efficient asset allocation from 54 policies by considering the highest Sharpe’s Ratio. Each asset class was allocated based on the
level of risk taking and investment period. We collected monthly data on real rate of return and risk from 2006 to 2015. The findings seem to indicate that the asset with the highest return and risk was PROPCON. It was followed by SET50, gold bullion, government bond, and 1-year fixed deposit, respectively. The results tend to be likely due to time period; when investment period was increased
the efficiency from Sharpe’s Ratio became higher. Interestingly, the asset with the highest ability to diversify risk when investing in equity was gold bullion and government bonds.